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South African Stocks in Demand After Zuma Quits, Rand Soars

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  • South African Stocks in Demand After Zuma Quits, Rand Soars

South African stocks index rose as much as five per cent on Thursday, putting the main index on track for its biggest one-day gain in more than three years.

The currency remained on the front foot, soaring to its firmest since early 2015, in the wake of Zuma’s exit.

Analysts have, however, warned the rally faces serious obstacles ahead of a budget speech next Wednesday.

Zuma quit late on Wednesday, reluctantly heeding orders by the ruling African National Congress ( ANC ) to bring an end to a nine-year tenure punctuated by scandals, stagnant economic growth and policy uncertainty.

As at 1530 GMT, the blue chip Top-40 index surged four per cent to 52,665 points, pulling back from a high of 53,072 achieved earlier but still on course for its biggest one-day gain since Sept. 2015.

The broader All-share index was up by 3.72 per cent at 59,533 points.

“The big news is that Zuma has now resigned and that has created a lot of euphoria.

“South African incorporated, banks, retailers and the like are all looking sharply better as a result,” said Independent Securities’ trader Ryan Woods.

South African banks considered the barometer of both economic and political sentiment were a feature on the gainers’ list.

The banking index surged 5.8 per cent with Nedbank rising 5.37 per cent and rival FirstRand up 6.4 per cent.

Banks have largely borne the brunt of Zuma’s policy decisions that included the sacking of two respected finance ministers, Nhlanhla Nene and Pravin Gordhan.

That, along with a weak economy, contributed to sovereign credit ratings downgrades to junk by S&P Global Ratings and Fitch.

In reaction to Zuma’s resignation, ratings agency Moody’s said it was focused on the new leadership’s response to economic challenges. S&P Global Ratings said the leadership change would not immediately affect the credit status.

Cyril Ramaphosa, former chairman of African biggest telecoms operator MTN Group, was sworn in as president on Thursday.

Ramaphosa, who has vowed to fight corruption and revitalise the economy, is seen by business leaders and investors as well placed to turn around the economy.

South Africa’s Gross Domestic Product (GDP) is estimated to grow by less than one percent this year.

Another key issue facing the 65-year-old president is policy uncertainty in South Africa’s mining industry, an important economic engine, which has been fighting in court with Zuma’s mines minister, Mosebenzi Zwane, over an increase in black ownership targets.

But some analysts said that the former union leader’s to-do list is way too long to make an immediate impact.

In the foreign exchange market, the rand advanced to levels last seen in February 2015.

“The good gains the rand has made could be extended toward 11.55/dollar, and move toward 11.00/dollar baring any further credit rating downgrades for S.A. and a credit positive budget,” said Investec’s Chief Analyst Annabel Bishop in a note.

At 1515 GMT, the rand was at 11.6600 against the dollar, having reached a session-best of 11.6025 earlier per cent stronger than its New York overnight close and at levels last seen in Feb. 2015.

“The economy is coming off an extremely low base so there is good chance the optimism will be around for some time, but Ramaphosa has to very soon move from the honeymoon phase to the doing phase,” said Chief Executive of Canon Assets Management Adrian Saville.

Reuters/Nan

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Forex

Naira Remains Flat Against US Dollar, Euro

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Naira Exchange Rate Remains Flat Against US Dollar and Euro on Black Market

The Naira remained unchanged on Tuesday despite the curfews and social unrest that grounded the nation’s economy.

Naira traded at N463 against the United States dollar on the black market on Tuesday morning, the same rate it exchanged on Thursday.

Against the European common currency, the Nigerian Naira exchanged at N540 to a single Euro.

However, the local currency dipped slightly against the British Pounds as it exchanged at N595 to a British Pound, representing a N3 decline from N592 it traded on Friday.

Social unrest amid weak economic fundamentals continued to weigh on Nigeria’s local currency, especially with Foreign Direct Investment expected to drop in the final quarter of the year through the first quarter of 2021.

This coupled with weak foreign reserves and a drop in global demand for crude oil is expected to compound Nigeria’s economic woes.

Lagos State governor, Babajide Sanwo-Olu, has said Nigeria’s commercial capital needs at least N1 trillion to fix the destruction and vandalisation that trailed the #EndSARS protest in the state. An amount equivalent to the state’s annual budget.

Experts, who spoke on the situation, said it would hurt the nation’s output and may plunge fourth-quarter GDP by as much as 6.9 percent. These rising uncertainties amid the second wave of COVID-19 and possible lockdown in key trading partners could further plunge Naira value against global counterparts in the fourth quarter of the year.

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Transparent Exchange Rate Can Boost Nigeria’s Forex Inflow

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Transparent Exchange Rate Can Improve Nigeria’s Diaspora Forex Inflow

Experts that gathered at a virtual summit organised by Ecobank Nigeria with a theme, ‘Financial Services & Remittance Solutions for Nigerians in Diaspora: Leveraging Ecobank’s Pan-African offering’, have said Nigeria can boost foreign exchange inflow through proper engagement and a transparent exchange rate.

Mr. Patrick Akinwuntan, Managing Director of Ecobank Nigeria, in his opening speech, said growing evidence has shown that diaspora remittances were positively impacting economies of various nations in the world.

Akinwuntan put the total annual remittances to Nigeria at around $20 billion per year, saying it boosts the nation’s foreign exchange earnings.

Speaking on how these remittances can be sustained, he said constant engagement with Nigerians abroad is imperative and it is the reason Ecobank is leveraging its digital technology through Rapidtransfer App and Ecobank mobile App to ensure affordable and easy transfer of funds by Nigerians abroad to their home country.

“Our dedicated Rapidtransfer, mobile remittance app is a game-changer for the market. It enables Africans and indeed Nigerians wherever they are to easily and instantly send money to bank accounts, mobile wallets and cash collection in – and across – 33 African countries.

“Historically, the cost of sending cross-border remittances to Africa has been far too high at about 6%-7%. Similarly, the process to send funds has long been inefficient and burdensome, with customers typically needing to go physically to an agent sometimes late in the night or in poor weather with attendant discomfort and risks.

“The Rapidtransfer app remittance solution is a quick, easy and reliable digital solution that removes all of these issues. It is indeed a game-changer for Nigerians and all Africans with its sustainable and standout affordability,” he said.

Speaking on transaction charges, the Ecobank Managing Director said transfer fee range from zero to about 3 percent as compared to 6 – 7 percent charge elsewhere.

He added that the bank’s instant transfer and transparent exchange rate is a unique factor its competitors do not possess.

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Naira to Dollar Rate Today: Naira Exchanges at N463 to Dollar on Black Market

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Naira to Dollar Rate on Black Market Today Stood at N463

The Nigerian Naira to dollar rate slid slightly against the United States dollar on Tuesday on the black market as social unrest continues to weigh on the nation’s economic outlook.

The local currency lost N1 against the US dollar to N463 while against the British pound it remains pressured at N592.

This decline continues against the European Union’s common currency, the Euro. The Naira traded at N540 to a single Euro on the black market.

Naira to dollar rate plunged amid rising economic uncertainties and unclear policy path caused by both COVID-19 and government limited fiscal buffers to cushion the negative impacts of the virus on Africa’s largest economy.

This coupled with the ongoing social unrest by the Nigerian youths to force decorum across the Nigerian Police Force and call global attention to decades of systemic intimidation and harassment of innocent citizens.

The Nigerian Stock Exchange has been closing flat since Thursday and continued this week, suggesting that investors are concerns and wary of eventualities as they look to safeguard their investments.

Again, the projected third-quarter recession, low foreign revenue generation, weak consumer spending and the rising cost of living are some of the factors hurting the Nigerian Naira outlook.

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