Money and Markets

This is the election outcome that may trigger a rally in the rand and SA shares

Business Insider SA
PRETORIA, SOUTH AFRICA - MAY 7 : South Africans w
(Photo by Getty Images)
  • A poll among international and South African professional investors shows that almost 63% believe that if the ANC gets a large enough national majority, it will boost the rand and shares.
  • The magic level seems to be 58.3% - if the ANC gets more than that, it may trigger a rally in the rand, bonds, and shares.
  • The vast majority of the investors believe Cyril Ramaphosa will remain president until 2022.
  • For more stories, go to Business Insider SA.

The research group Intellidex has polled dozens of investment decision-makers at local and offshore asset managers, investment banks, and institutional stockbrokers about their expectations for South Africa’s elections on 8 May.

The results give interesting insights into what the market has already discounted – and what shocks could cause volatility.

For starters, the majority believe that Cyril Ramaphosa will remain president until 2022, and that finance minister Tito Mboweni and public enterprises minister Pravin Gordhan will stay on until at least the end of the year.

Almost 63% of the participants expect that if the ANC wins by a large enough majority, that will give Ramaphosa a mandate to push through economic reforms – and that this will give the rand and shares a boost.

And for those who believe in this “mandate threshold”, the magic level that will trigger a rally seems to be 58.3%. If the ANC secures more than that in the national vote, they expect the rand, bonds and shares will rally.

Source: Intellidex
Source: Intellidex

The survey divides investors into different categories:

  • Offshore (outside of SA) and onshore (inside SA) “buyside” investors include asset managers and hedge funds.
  • “Sellside” investors are investment banks and institutional stockbrokers, private banks and private wealth manager advisors, both in SA and outside of the country.
  • The non-financial group includes policy makers, lawyers, diplomats, academics, and journalists.

Read: This is how election posters changed in South Africa over the past 25 years

Here were some of the other expectations:

The ANC will get less than 58% of the national vote

This is the investors' consensus expectation for the national vote: the ANC will get 57.4%, followed by the DA (20.7%) and EFF (11.4%).

“The latter two are in line with Intellidex’s views but the ANC is looking a little high versus our view of closer to 55%,” said Intellidex head of capital markets Peter Attard Montalto.

Ramaphosa should survive until 2022

The market sees a 75.7% probability of the President remaining in office immediately after the election, despite factional in-fighting within the ANC.

“Overall it seems that market views align with ours, that while a fightback will occur after the election, Ramaphosa cannot be removed before 2022,” says Montalto.

Gauteng is too close to call

While offshore investors have a larger belief that ANC keeping outright control of Gauteng, this seems to be one of the most uncertain outcomes of the elections.

Source: Intellidex
Source: Intellidex

“We are with the market overall in seeing it too close to call and very much a 50:50 outcome," says Montalto.

The DA is expected to keep control of the Western Cape.

Source: Intellidex
Source: Intellidex

Tito Mboweni and Pravin Gordhan are expected to retain their posts

Tito Mboweni is strongly favoured still to be finance minister at Christmas. Pravin Gordhan is also expected to be DPE minister at Christmas – though with some other views.

Source: Intellidex
Source: Intellidex

Source: Intellidex
Source: Intellidex

There is massive scepticism that Ramaphosa will succeed with reforms

Investors believe that there is only a one-third chance of growth-boosting reform after the elections, Intellidex found.

Reform was defined as that which would allow growth to reach 3% by 2024.

Source: Intellidex
Source: Intellidex

Offshore investors were the most pessimistic, with only 21.5% expecting growth-boosting reforms in the next 5-year parliamentary term.

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