South African Rand, Bonds Erase Losses Sparked by Nene's Firingby
South Africa’s currency and bonds rallied to their strongest levels since December, when President Jacob Zuma roiled markets by firing his finance minister, as a recovery in commodity prices and an improvement in China’s economy fueled investor appetite for riskier assets.
The rand gained as much as 1.1 percent to 14.5344 per dollar, the strongest level since Dec. 9, when Zuma unexpectedly removed Finance Minister Nhlanhla Nene and replaced him with a little-known lawmaker, raising doubts about his commitment to fiscal targets. Yields on benchmark rand bonds due December 2026 dropped 11 basis points to 8.98 percent, falling below 9 percent for the first time since the start of the political crisis.
Data that showed Chinese exports advanced for the first time since June pointed to a stabilization in the world’s second-largest economy and the biggest buyer of South African raw materials. The Bloomberg Commodity Index gained for a fourth day, fueling demand for shares in South African commodity producers and sending the nation’s benchmark stock index to its biggest one-day gain in six weeks.
“Emerging-market investors were sitting too long of cash through the first quarter and had to put it to work even if they wanted to remain underweight South Africa,” Peter Attard Montalto, an Africa economist at Nomura International Plc, said via e-mail. Investors are ignoring South Africa’s political risks for now as the risk-on environment drives demand for emerging-market assets, he said.
The FTSE JSE All Share Index climbed 1.7 percent to the highest closing level since March 22. Anglo American Plc, a diversified miner, led gains with BHP Billiton Plc and Kumba Iron Ore Ltd.
The cost of insuring South Africa’s dollar debt against default for five years using credit default swaps dropped 20 basis points to 295 basis points, just six points shy of the level they traded at before Zuma fired Nene.