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Markets

South Africa's rand slumps to two-month low as Mabuza sworn in to parliament

JOHANNESBURG: South Africa's rand tumbled to its weakest in three weeks on Tuesday as deputy president David Mabuza
28 May, 2019

JOHANNESBURG: South Africa's rand tumbled to its weakest in three weeks on Tuesday as deputy president David Mabuza was sworn in as a lawmaker after being cleared by the ruling African National Congress of bringing the party into disrepute.

At 1700 GMT the rand was 2.15% weaker at 14.7350 per dollar, its weakest level since March 28, after opening at 14.4225, with news of Mabuza's swearing in adding to a risk-off tone globally after trade tensions resurfaced.

The move clears the way for 58-year-old Mabuza, an important ally of President Cyril Ramaphosa, to remain his deputy, but again throws a spotlight on corruption allegations that have hit the party's popularity. Investors are keen to see proof of Ramaphosa's clean governance pledge.

Mabuza denies any wrongdoing, and has said he wants all the allegations levelled against him to be tested in a court of law.

"The rand outperformed its EM peers last week after elections and was able to hold onto those gains because of the positive politics and expectations about the new cabinet," said BNP Paribas analyst Jeffrey Schultz.

"We've had delays to that announcement because of the Mabuza issue so that outperformance has been eroded. The market is anxious to see how small cabinet is going to be and what key appointments like the finance ministry are going to be."

The ANC easily won this month's general election, but its vote dropped sharply due to anger over corruption scandals.

Bonds also took a hit, with the yield on benchmark debt due in 2026 8.5 basis points to 8.445 percent.

On the bourse, stocks traded weaker with the broader All-Share index shedding 0.1% to 54,432 points, while the Top-40 index declined 0.07% to 48,464 points.

Banking stocks fell 2.49% to 90.70 rand. Leading the downside, Old Mutual continued to slip after parting ways with its CEO Peter Moyo on Friday. The insurer declined 4.51% to 20.34 rand, while financial firm FirstRand fell 3.9% to 61.79 rand.

On the upside, Sibanye-Stillwater's rose 10.29% to 12.43 rand and South African-listed shares in Lonmin lifted 11.86% to 12.07 rand after shareholders from both firms approved a takeover deal that would create deal the world's second-largest platinum producer.  "It's quite a big one, and it was well received," said Nick Kunze, a portfolio manager at Sanlam Private Wealth.

Copyright Reuters, 2019

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