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Cape Town - The rand strengthened below the key R15/$-mark on Tuesday after plunging to all-time lows against all major currencies following a cabinet reshuffle that saw Finance Minister Nhlanhla Nene relegated to serve at the Brics Development Bank.
On Tuesday the rand traded as low as R14.94 from Monday's close of R15.10 and the record low of R16.05 reached amid the Nene saga.
The 17 financial and bank heavyweights in the JSE’s Top 40 index lost a massive R289bn off their combined market capitalisation from where they closed before Nene's axing on Wednesday night. However, the index regained R118bn on Monday following a second cabinet reshuffle which saw Pravin Gordhan, Nene's former boss, reinstated in his old position.
READ: Zuma's finmin blunder costs SA R171bn
The market rout started when Zuma removed Nene from his post on Wednesday evening after 19 months, without giving any reasons except to say that he would be switched to another key role. His replacement was David van Rooyen, a lawmaker several analysts said they had never heard of.
Van Rooyen, who had been finance minister for only four tumultuous days, has swapped roles with Gordhan as Minister of Cooperative Governance and Traditional Affairs.
READ: SA reels from three finance ministers in one week
But calm has largely returned to the markets after Sunday night's surprise announcement of Gordhan's return to the National Treasury.
By 11:40 the JSE All-share index was up 0.57% to 48 357 points, the JSE Top 40 gained 0.54% to 43 648 and the hard-hit Financial index rose 1.3% to 14 423 points.
Top performing financial stocks included Sanlam [JSE:SLM] (+5.6% to R52.70), Standard Bank [JSE:SBK] (+4.43% to R110.70 and Barclays Africa Group [JSE:BGA] (+3.74% at R144.42).
"With the appointment of Mr Gordhan, the South African currency (ZAR or rand) and the Johannesburg Stock Exchange have been stabilised to some extent.
"However, there are still many questions that investors will have regarding the stability of South Africa with President Zuma at the helm," Brett Birkenstock, director at Overberg Asset Management, told Fin24 on Tuesday.
Birkenstock said the market will still want to see that Gordhan continues Nene’s policy and follows through on the nuclear deal, South African Airways and other reckless expenditure for government.
Heads must roll
"I suspect, however, that if South Africa wants to have the tainted view of the land reviewed and a continued stability in the currency, bond markets and JSE, the country will need to have a new leader appointed.
"Last week’s events have been the final straw for investors, South Africa and the world as a whole. If South Africa is to be taken seriously as an investment destination again, heads need to roll," said Birkenstock.
READ: Dawie Roodt: Zuma must go, he's a disgrace
Adam Phillips, independent treasury consultant at Umkhulu Consulting, said in his morning note to clients that Gordhan said all the right things at his press conference on Monday, "but it remains to be seen if he can herd Zuma in the right direction".
"As they say in rugby, 'he has been thrown a hospital pass' by a player on the same side. How he deals with Zuma and his inner cabinet will be important and I presume he is already looking at his budget speech for February," said Phillips.
Overall, Phillips said, emerging markets at the moment are not a safe place for investors. "On top of South Africa, we have a meltdown in Polish equities amid a policy change, while Brazil is likely to impeach their president and Turkey's standoff with Russia continues to see the lira slide.
"None of this helps these countries as the Fed sits down for its two-day meeting. The likelihood of a (US interest rate) hike now stands at 76%, but it is (Fed chair Janet) Yellen's comment that will be important, said Phillips.
South African markets will be closed for the Day of Reconciliation holiday on Wednesday, "so expect plenty of book squaring with the Fed meeting set to dominate tomorrow night".
Investors will likely also keep a close watch on #ZumaMustFall marches planned for Wednesday.
"Large numbers will make the ANC executive very nervous," said Phillips.
"When one combines political and economic instability that we are seeing around the globe, it makes for very unhappy reading and leads to investors staying on the sidelines."
