SA’s equities rallied for the second straight session on Tuesday, with banks helping the all share index to book its biggest one-day gain this year in a repeat of the euphoric mood that characterised the ascension to power of President Cyril Ramaphosa five years ago.
The all share index, the broadest measure of the SA stock market performance, climbed 3.5%. Banks, which are largely dependent on policy certainty and economic growth, featured on the winners’ list, with FirstRand surging 8.14% to R76.25 and Capitec skyrocketing 9.11% to R2,589.21. Nedbank shot up 7.06%, Standard Bank jumped 6.56% and Absa 6.52%.
The bullish sentiment in the stock market is a reversal from the plunge in share prices in banking, insurance and retail seen a few weeks ago after it became clear that support for the ANC would fall well below the 50% mark.
Investors are betting on policy certainty for the next five years after the formation of a government of national unity (GNU) in which the ANC, DA, IFP, GOOD and the Patriotic Alliance (PA) have joined forces.
The set-up is seen by market players as likely to help Ramaphosa continue with market-friendly reforms that include breaking up Eskom, reducing the budget deficit and opening the rail sector to more private players.
The DA has already shown its support for Ramaphosa’s Operation Vulindlela, which is meant to unlock SA’s economic potential by accelerating structural reforms.
However, Ramaphosa has faced criticism from business leaders, his biggest cheerleaders, for being too slow to push through reforms that would bring economic growth and boost investor returns.
Ratings agency S&P said in a bulletin on Tuesday that the outcomes of Friday’s parliamentary processes pointed to “broad policy continuity”.
“We expect SA’s new GNU will not cause a significant policy shift ... the new coalition’s nine-point agenda aims to prioritise structural reforms to address infrastructure and service delivery shortfalls and weak investments, while gradually narrowing fiscal deficits,” S&P said.
“The election outcome is broadly favourable for the economic and fiscal outlook, compared with the alternatives. Nevertheless, we expect the government will face an uphill battle to revive growth and maintain fiscal discipline, while navigating the new realities of coalition politics.”
The ratings agency warned ideological differences on affirmative action and foreign policy could destabilise the GNU.
“While increased political participation and a push from the more market-orientated DA could drive stronger reform momentum, coalitions are untested at the national level. At the provincial and municipal levels, coalitions have been volatile and resulted in a high turnover of mayors. Moreover, attempts by the main left-leaning opposition parties, MK and the EFF, to block legislation could increase instability.”
The rand also gained on Tuesday ahead of Ramaphosa’s inauguration on Wednesday, firming 1.04% to R18.07/$ by 5.45pm.
Retail stocks, the earnings of which rely heavily on SA’s economy, were also up on the day, as were insurance firms. Shoprite leapt more than 8%, Dis-Chem 7% and Spar about 2%. Pick n Pay closed 4% higher and Clicks added almost 10%. Sanlam shot up 9%, with peers Old Mutual and Discovery firming 8% and 6%, respectively.
Business Leadership SA CEO Busisiwe Mavuso said the GNU presented SA with an opportunity to fix the economy.
“A positive momentum has been created through the mature way the GNU has come about. It has sparked confidence among businesses and investors that the country has a historic opportunity to make a big leap forward to address the challenges we face,” she said.
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