Rand, Bonds surge as Zuma reappoints Gordhan as FinMin

By Vernon Wessels

(Bloomberg) — The rand strengthened, leading gains among major and emerging-market currencies, and bonds rallied after South African President Jacob Zuma bowed to pressure and reversed a decision to appoint a little-known former small-town mayor as finance minister.

The currency had its biggest one-day advance since October 2008 after Zuma late on Sunday reappointed Pravin Gordhan to oversee the National Treasury. Yields on benchmark bonds fell from seven-year highs.

South Africa's banknotes, which features an image of former president Nelson Mandela on the front in Pretoria November 6, 2012. REUTERS/Siphiwe Sibeko
South Africa’s banknotes, which features an image of former president Nelson Mandela on the front in Pretoria November 6, 2012. REUTERS/Siphiwe Sibeko

The 73-year-old leader roiled South African assets and sparked outrage on Dec. 9, when he fired Nhlanhla Nene and replaced him with lawmaker David van Rooyen. Gordhan, 66, was finance minister from 2009 to May 2014, when he was replaced by Nene, who until then was his deputy. Gordhan steered the economy through the first recession in 17 years, while fending off pressure from labor unions to increase spending.

“The markets will welcome back Gordhan,” John Cairns, a currency strategist at FirstRand Ltd.’s Rand Merchant Bank in Johannesburg, said in an e-mailed note. “He is a known entity, is his own man and did well when in the post previously. But it is certainly unreasonable to expect all of last week’s losses to be reversed — a huge amount of uncertainty has been created in the past few days.”

The rand gained 4.8 percent to 15.1723 per dollar at 8:47 a.m. in Johannesburg on Monday after falling to as much as 16.0543 on Friday, an all-time low. Yields on rand-denominated bonds due December 2026 declined 96 basis points to 9.42 percent. Rates on the securities last week jumped the most on record while the currency sank almost 10 percent against the greenback.

South Africa’s benchmark stocks index posted its worst week in a year in the five days through Friday as the gauge extended a slide into a correction. Trading on the Johannesburg Stock Exchange starts at 9 a.m. local time.