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Stock traders welcome SA poll result - now for reforms

May 10 2019 21:19
Adelaide Changole, Bloomberg

Stock investors welcomed results from South Africa’s election that appeared to strengthen the hand of President Cyril Ramaphosa to push on with reforms.

But, trade-war storm clouds and the absence of an economic revival could still rain on the country’s post-election parade, they said.

South African stocks jumped the most in more than four months Friday as the continuing count from Wednesday’s poll showed the ANC with 57% of the votes. Analysts have said a win of between 55% and 60% is expected to boost Ramaphosa’s position within the party and his ability to implement key changes.

“I think 57% will be seen as positive for the market because it means they don’t need to do much to convince other parties to undertake reforms,” said Peter Takaendesa, a money manager at Mergence Investment Managers. The results are “largely in line” with expectations, he said.

South Africa’s benchmark index was 1.1% higher as of 15:59 in Johannesburg, after climbing as much as 1.7%, the most since January 9. Banks and insurance companies were prominent among gainers, buoyed by strength in the rand. The currency rose 1.1% against the dollar, the best performance among emerging-market currencies Friday after the Turkish lira.

Here are more comments from investors on the election outcome:

Takaendesa, Mergence Capita

“The big force that might frustrate a rally in the South African market is the developments in the global equity market. If the trade issues in the US and China dominate sentiment and narrative in the stock markets, then it is unlikely that investors will capitalise on a good election result in South Africa. However, should that take a back seat, then we should see South Africa benefit from the result." Rob Pietropaolo, Unum Capital. “The result is not a big surprise and it is OK for markets," Pietropaolo said by phone. “The result by itself will not inspire investors. It is the application of the reforms promised before the election that will inspire confidence, and investors will be looking to see if Ramaphosa follows through with the necessary changes."

South Africa is still in a precarious position. Nothing has changed, apart from a consolidation in leadership.

“It is now the job of these new leaders to convince investors that things will change, and that they will undertake the reforms needed if they want to inspire investor confidence going forward.” 

Casparus Treurnicht, Gryphon Asset Management

“Investors are tired of promises, and although Ramaphosa makes promises, actions speak louder than words. No action will be more damaging over the next five years. We are 25 years down the line of ANC government, and we are in for another five. We need drastic changes and the public will be monitoring Ramaphosa’s actions closely. So far, he’s done nothing.” 

Arthur Kamp, economist, Sanlam Investment Management

“The center has held and the election result is no impediment to implementing economic reforms. Investors may adopt “a wait and see approach, given the apparent widespread belief that there are still significant fissures in the party that could still derail the best intentions of ‘reformists’. Analysts will probably wait for specific landmarks to assess whether or not South Africa is on its much-anticipated reform path. A particularly important development will be the announcement of the cabinet later this month.

“Looking ahead, flags signaling the path we are on will include whether or not the mooted nationalisation of the central bank occurs and, if so, whether it influences the independence of the Bank and its ability to deliver on its current mandate, including the pursuit of its current inflation target as specified by the National Treasury.”

Find everything you need to know about the 2019 National and Provincial Government Elections at our News24 Elections site, including the latest news and detailed, interactive maps for how South Africa has voted over the past 3 elections. Make sure your News24 app is updated to access all our elections coverage in one place. 

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