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Ramaphosa's election boosts South African-exposed shares

By Sean Farrell

Date: Tuesday 19 Dec 2017

Ramaphosa's election boosts South African-exposed shares

(ShareCast News) - Shares in Anglo American, Old Mutual and Lonmin rose after the election of Cyril Ramaphosa as leader of South Africa's ruling ANC party.
Ramaphosa won a closely fought race to lead the ANC on 18 December, beating Nkosazana Dlamini-Zuma, the former wife of President Jacob Zuma.

Ramaphosa, a former union leader who has become one of South Africa's richest black businessmen, has pledged to end corruption and bring down unemployment from 28%. His plans include business-friendly measures such as special economic zones, reforming tax and spending on infrastructure.

His election could lead the ANC to sack Zuma, who has been beset by allegations of corruption, as president. Investors may also hope Ramaphosa's election can revitalise inward investment and ward off a potential cut to South Africa's credit rating by Moody's.

Anglo American rose 1.9% to £15.08 at 10:47 GMT. The miner has extensive interests in South Africa where it was founded in 1917. Old Mutual, the financial services group which owns a stake in South Africa's Nedbank, rose 4% to 221.5p.

Both companies extended gains made a day earlier as expectations built that Ramaphosa would win the ANC election. Lonmin, the miner whose main business is in South Africa, rose 3.5% to 84p.

On 24 November, debt rating agency Standard &Poor's in downgrading the country's long-term sovereign debt rating to 'junk' or below investment grade. Yet that same day Moody's refrained from doing so, although it did place its own ratings on review.

If Moody's joined its rivals in assigning a junk rating to the country's bonds, that would force many institutional investors to stop holding bonds issued by Pretoria, hitting the cost of external financing for the entire nation as well as corporates based there.

Analysts at Rabobank said: "Ramaphosa is generally seen as business-friendly and he is expected to take steps to remove current President Zuma from office. Zuma's divisive and authoritarian politics have undermined confidence in South Africa's economic and political stability, which has also led to a steady decline in its sovereign ratings this year."

David Madden, market analyst at CMC Markets UK, said the shares' rise was complicated by Old Mutual agreeing to sell a business and the recently announced takeover of Lonmin by South Africa's Sibanye-Stillwater. But he said Anglo American outperforming other London-listed miners indicated there was a boost from Ramaphosa's election.

"It's a decent enough increase in economic sentiment in the country and companies that operate in South Africa or have exposure to South Africa. Investors may be thinking these companies are undervalued if they believe the crisis in South Africa has run its course."

Standard Chartered, which has a big African business, outperformed other UK banks, rising 1.4% to 774.5p. The rand hovered close to a nine-month high against the dollar and shares of Johannesburg-listed companies rose.

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