South African stocks surged and the rand strengthened, bucking the global trend of risk asset sell-offs, following an agreement among rival political parties to support the re-election of Cyril Ramaphosa as president.
Also read: Parties agree on government of National Unity
The agreement paves the way for a broad government alliance led by the ANC and the business-friendly DA after the ANC experienced its first loss of outright majority since 1994.
‘Such a coalition would be market-friendly and rand-positive,’ noted Yeon Jin Kim, an emerging-market analyst at Credit Agricole.
‘In the medium term, we believe there could be more upside for the rand, provided key reforms are announced and implemented.’
The FTSE JSE Africa All Share Index climbed up to 1.6%, marking its strongest increase in seven weeks, before moderating slightly. Banking stocks also rallied to a nearly four-year high.
The rand rose to R18.34 against the dollar after 2pm, distinguishing itself as the sole emerging-market currency to gain among the 24 tracked by Bloomberg. This week, the rand has appreciated about 3%, in contrast to a 0.4% decline in the MSCI EM Currency Index.
The ANC, which has governed since the end of apartheid in 1994, extended invitations to all major parties to participate in a government of national unity. Former President Jacob Zuma’s uMkhonto weSizwe Party (MKP) and the EFF, both advocating for land expropriation and the nationalisation of mines and banks, declined to join.
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