Ramaphosa rand rally stumbles on narrow victory
The rand slipped to R12.76/$ on Tuesday morning from the R12.53/$ it reached on the initial euphoria of Cyril Ramaphosa’s narrow victory as new ANC president on Monday.
Ramaphosa got just 179 more votes than his rival Nkosazana Dlamini-Zuma.
"Markets got this one wrong — and were pricing in a Cyril slate victory, rather than a hung national executive committee [NEC]. Hence, we expect the rand and the domestic-facing stocks to weaken [on Tuesday] after their recent rally. Some of the euphoria will be re-priced out of the market and it will retrace some of its steps as the reality sinks in," BayHill Capital MD Geoff Blount said in a note e-mailed on Monday night.
Barclays Research revised its forecast for the rand to end 2017 at R13/$, saying its previous forecasts were "predicated on a significantly worse political outcome".
"However, we do not project further meaningful rand gains from spot levels throughout our forecast horizon. We remain cautious about Mr Ramaphosa’s ability to deliver a credible budget ahead of Moody’s rating review in March and see the potential creation of two power centres within the country as problematic for advancing meaningful changes ahead of the 2019 elections. As such, we look for the rand to head back towards R13.50/$ by end-March before ending 2018 roughly where it began," Barclays said.
The strengthening rand benefited banks on Monday, helping FirstRand gain 6.93% to R59.89, Barclays Africa Group 5.97% to R171.50, Standard Bank 4.38% to R185, and Nedbank to 4.24% to R240.
"SA has the potential to provide for all its citizens but, too often, this capacity has been swamped by institutional dysfunction and policy confusion," Nedbank CEO Mike Brown said in a statement e-mailed on Monday night congratulating Ramaphosa.
"This makes investment more difficult across the economy, as we cannot rely on institutions to do what they are meant to do, or understand the outlook for regulations affecting the private sector. As a result, transaction costs go up, return on investment declines, and less investment takes place. Job creation and economic growth suffer as a result."