Rand backtracks, stocks ride cabinet cheer higher

The South African rand weakened late on Thursday, giving back gains after President Cyril Ramaphosa’s new cabinet retained familiar faces in key positions, including Tito Mboweni as finance minister.

The rand was 0.3% down at R14.70 per dollar by 1620 GMT, having improved on Wednesday from a five-month low hit before the cabinet announcement.

Ramaphosa announced his smaller cabinet late on Wednesday, following on from a pre-election pledge to reform and revive an ailing economy and attract foreign investors.

In addition to retaining Mboweni, Ramaphosa kept on Pravin Gordhan as public enterprises minister. The ministry oversees state-owned companies including power utility Eskom. He also retained David Mabuza as deputy president. “Overall we see the new cabinet as modestly positive, supporting our view that SouthAfrica’s prospects are gradually improving as Ramaphosa’s leadership steadily delivers better governance,” said Johann Els, chief economist at Old Mutual.

“This should support South African assets including the currency.”

Producer price inflation quickened to 6.5% year on year in April, from 6.2% in March, the statistics agency said.

First-quarter growth is due on Tuesday and is expected to show the economy contracted after a slump in mining and manufacturing activity.

In equities, stocks strengthened on the back of a stronger rand after announcement of Ramaphosa’s leaner cabinet.

The All-Share index was up 1.3% at 55,701 points, while the Top 40 index rose 1.4% to 49,667 points.

Leading the blue-chips on the Top 40 index was leading food producer Tiger Brands, which gained 4.9% to R221.57. There were also strong gains for miner Goldfields , up 4.5% at R61.01, and Shoprite, which advanced 4.2% to R171.06.

On the downside, South Africa’s Omnia said it would hold a R2 billion rights issue to cut debt, sending its shares down 12.1% to R46.60.

There was more buying after something of a hiatus ahead of President Ramaphosa’s cabinet announcement, reflecting greater certainty, said Independent Securities trader Ryan Woods.

“[Tiger Brands] has been under huge amounts of pressure for some time. A lot of these stocks have been bombed up for quite some time now and you’re seeing some buying come back in pretty much across the board.”

In fixed income, the yield on the benchmark government bond due in 2026 was down 5.5 basis points at 8.485%.