South African markets and country-specific exchange traded fund rallied Monday as investors were optimistic that pro-reform candidate Cyril Ramaphosa secured victory in the ruling ANC’s leadership vote.
The iShares MSCI South Africa ETF (NYSEArca: EZA) increased 5.0% Monday and was up 25.8% year-to-date.
Banks were among the best performers in South Africa’s equity market, with the FTSE Johanessburg Stock Exchange sub-index of bank stocks up 6.6% to its highest level on record. EZA includes a hefty 27.6% tilt toward financials, followed by 27.4% consumer discretionary and 12.5% materials.
South African Deputy President Cyril Ramaphosa was elected leader of the African National Congress Monday in a tight vote, vowing to fight rampant corruption in a scandal-plagued party and to revitalize the economy, report Alexander Winning and Nqobile Dludia for Reuters.
“Politicians are under pressure to change and they are getting a reaction not just form the local electorate, but from markets. It will be pressure from both those angles that will force change,” Simon Quijano-Evans, strategist at Legal & General Investment Management, said.
According to money managers including Credit Agricole CIB and JPMorgan Chase & Co, the reformist agenda of Ramaphosa may help accelerate economic recovery, avoid a credit-rating downgrade and strengthen the currency, report Selcuk Gokoluk and Dana El Baltaji for Bloomberg.
Nevertheless, the revamped party will have a lot of work ahead of itself as the country has been under duress in recent years.
“It’s now about liberalizing again, cutting red tape, improving governance,” Burkhard Varnholt, deputy chief investment officer of Credit Suisse Group AG, told Bloomberg. “There is too much corruption and all of that needs to be cut, and then South Africa can become the darling of Africa investors again as it once was. The crucial element in that equation should be the rand, which has suffered greatly and should encourage investors to move money back into the economy.”
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