South African banks soar on formation of new government

An index of South African bank stocks jumped to a record Friday as political leaders agreed to a broad alliance to form the next government.

The gauge of banking stocks rallied as much as 5.7%, the most since November 2020. Absa, Capitec Bank and Standard Bank were all more than 5% higher by 4:27 p.m. local time.

The deal between parties sets the stage for an alliance led by the African National Congress and the business-friendly Democratic Alliance following an election in which the ANC lost its outright majority for the first time since 1994.

“The government of national unity outcome with the African National Congress and Democratic Alliance is positive for South African banks as it is probably the best outcome for longer-term economic growth and investor sentiment toward the country’s economy,” wrote Anchor Securities analyst Craig Smith in emailed comments.

“Such a coalition would be market-friendly and rand-positive,” said Yeon Jin Kim, an emerging-market analyst at Credit Agricole, in a note to clients.

“In the medium term, we believe there could be more upside for the rand, provided key reforms are announced and implemented.”

The FTSE JSE Africa All Share Index climbed as much as 1.6%, the most in seven weeks, before paring the advance. A gauge of banking stocks rallied the most in almost four years to a record high.

The rand gained 0.5% to R18.35 per dollar as of 1:02 p.m. in Johannesburg, the only emerging-market currency to rise on the day among 24 monitored by Bloomberg.

The rand is up 3% this week compared with a 0.4% decline for the MSCI EM Currency Index.