South African rand firmer as ANC ponders Zuma’s future, stocks fall

JOHANNESBURG (Reuters) – South Africa’s rand firmed against the dollar on Tuesday as the market positioned for the possible removal from office of President Jacob Zuma, while share prices hit a four-month low as the global stocks rout intensified.

At 1523 GMT, the rand traded at 12.0300 per dollar, 0.78 percent firmer than its close on Monday.

“Speculation about an imminent removal of President Zuma has intensified. His removal must surely now mostly be in the price but we would still expect a knee-jerk reaction when it transpires,” Rand Merchant Bank analyst John Cairns said in a note.

The ruling African National Congress (ANC) has called a special meeting of its decision-making National Executive Committee for Wednesday, at which removing Zuma is expected to be discussed.

The speaker of parliament said on Tuesday the president’s state of the nation address, which had been scheduled for Thursday, would be postponed, hinting at the growing pressure on Zuma to step down.

His scandal-plagued tenure has been seen as a weight on the economy, and the rand has tightened up to its firmest in over two years as the likelihood of his removal grew after Cyril Ramaphosa was elected party chief in December.

Government bonds also firmed, with the yield on the benchmark instrument due in 2026 down 3.5 basis points to 8.47 percent.

On the bourse, the Johannesburg All-Share index weakened 1.29 percent to 56,377 points, while the Top-40 index declined 1.27 percent to 49,855 points, both to levels last seen in October 2017.

The equity market selloff had been viewed by some as a healthy correction after a rapid run up over the last year, but as it snowballed through Asia and Europe and looked to be on its way back to Wall Street, nerves were starting to fray.

“While the fall in global equity markets looks dramatic, it is no more dramatic than the record rises we have seen since the end of November. For that reason alone many would argue a correction was on the cards,” said Jacob Deppe, head of trading at online trading platform Infinox in a note.

“The party may be over for now but this could be more of a sobering correction than a rout.”

Index heavyweight Naspers trimmed earlier losses, which saw it fall 4.59 percent, to close down 0.50 percent to 3,104.51 rand.

“Tencent has been sold-off in line with the global rout in global stock markets and specially the global technology shares,” Avior Capital Markets Managing Director Kevin Mattison said.

Naspers holds a third of China’s biggest social network and gaming firm Tencent’s stock.

(Reporting by Olivia Kumwenda-Mtambo and Nqobile Dludla; Editing by Hugh Lawson)

Xolani

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