Share

Wall Street cheers as Zuma's resignation marks new era for rand

Lima - Traders couldn’t be happier to see the end of President Jacob Zuma’s nine years in power.

The 75-year-old leader had driven Wall Street to its wit's end in recent years amid ratings downgrades, declining growth and a string of scandals. After surviving multiple attempts by opposition parties to oust him throughout his presidency, he agreed to step down late on Wednesday.

The rand rallied to its highest level since February 2015, following weeks of maneuvers by the ruling African National Congress to remove him from office.

"This is a very big relief," said Shamaila Khan, director of emerging markets at AllianceBernstein. "Institutions had been deteriorating rapidly."

Zuma’s resignation opens the path for his deputy, Cyril Ramaphosa, to take the helm of the economy. Ramaphosa may be sworn in as president as early as Thursday or on Friday, according to a schedule released by Parliament before Zuma delivered his fateful speech.


The ANC said it wants a quick transition so Ramaphosa can move to fulfill pledges to revive the struggling economy, clamp down on corruption and rebuild its image ahead of elections scheduled for mid-2019.

The five-year credit-default swaps tightened 3.5 basis points on Wednesday to 154 points - 14 points away from the five-year low reached in January.

Here’s what Wall Street had to say about the news:

Khan:

"It’s obviously a positive development and will lead to improvements in institutions down the road," she says. While the rand had already rallied in anticipation of Zuma’s resignation, a recovery in risk assets should propel the currency even higher, according to Khan.

She favours South African corporate and quasi-sovereign bonds.

Ray Zucaro, chief investment officer at RVX Asset Management in Aventura, Florida:

Zucaro, who has been underweight South African debt, says he’s willing to increase his exposure now and favours the belly of the bond curve.

"This is kind of what I have been waiting for” to buy the nation’s debt, he says. "Zuma’s possible resignation has been brewing like a soup on the back burner for a while."

Erik Nelson, a currency strategist at Wells Fargo:

"There’s been this expectation for months now that eventually he would be removed from office."

He says optimism had been priced in after Ramaphosa came to power and expectations for Zuma’s removal climbed. "There are still large challenges on the economic, fiscal, and political fronts. I wouldn’t say Zuma being removed is a panacea," he said. He expects the rand to gain steadily amid dollar weakness.

Win Thin, head of emerging-market currency strategy at Brown Brothers Harriman:

"This was already priced in," he says about the muted market reaction. Thin says there is a risk that the rand will weaken on Thursday as investors "buy the rumour and sell the fact." The broader backdrop of rallying emerging-market currencies will help the rand, he says.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.89
+0.2%
Rand - Pound
23.84
+0.3%
Rand - Euro
20.36
+0.4%
Rand - Aus dollar
12.30
+0.3%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders