Picture: REUTERS, SIPHIWE SIBEKO
Picture: REUTERS, SIPHIWE SIBEKO

The rand jumped the most against the pound since December 2017, as the risk of a collapse of the British government and a chaotic break with the EU overshadowed local concerns about property rights.

On a day that a parliamentary committee recommended a constitutional amendment to allow the expropriation of land without compensation, the rand gained as much as 2.7% against the British currency, the biggest intraday gain since December 15 2018 — three days before Cyril Ramaphosa narrowly defeated Nkosazana Dlamini-Zuma in the race to lead the ANC, paving the way for him to replace Jacob Zuma as the country’s president in February.

UK banks were battered across the board by the prospect of a Brexit that damages the economy, with Barclays, Absa’s former majority shareholder, falling about 8%. Royal Bank of Scotland Group fell more than 10%. Standard Bank, SA’s biggest lender, gained 1.3%.

The rand was 2.32% higher at R18.26 a pound by 5.12pm. It also rose against the dollar, appreciating 0.87% to R14.2714 but still 15% weaker in 2018 so far. It was 0.84% stronger at R16.1437 against the euro.

The rand was also bolstered as interest rate increases in Indonesia and the Philippines boosted sentiment towards emerging-market assets.

Local banks have previously warned that uncertainty caused by the debate on land expropriation would drive down the value of bonded properties and risk financial instability.

The announcement by Ramaphosa late in July that the ANC would seek to change the constitution was blamed for a change in sentiment that wiped out the initial euphoria that had accompanied his election.

"It is important to separate the noise from material political events," said Peregrine Treasury Solutions corporate treasury manager Bianca Botes, referring to the deliberations in parliament. "Chaos in parliament, and empty promises and threats that are not backed up by the introduction of proposals for policy changes can, to some extent, be deemed to be election tactics."

The risk of the UK leaving the EU without an agreement to ensure continued friction-free trade rose dramatically on Thursday, after two of Prime Minister Theresa May’s ministers, including the one whose job was to negotiate an a agreement with the EU, quit in protest against a divorce deal she had presented to her cabinet the day before.

In addition to a chaotic Brexit that cuts them out of European markets, banks were also hit by the possibility of a Labour government led by Jeremy Corbyn, a believer in old-style socialist policies such as nationalisation and price controls.

"May has survived resignations before, but coming on the back of her final deal, this could be far more damaging if others walk as well," said Oanda analyst Craig Erlam.

gernetzkyk@businesslive.co.za