JOHANNESBURG (Reuters) – South African stocks index rose as much as 5 percent on Thursday, putting the main index on track for its biggest one-day gain in more than three years, on hopes the resignation of Jacob Zuma as president paves the way for new leaders to quicken the pace of economic growth.
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. [nL8N1Q51P4]
As of 1140 GMT, the blue chip Top-40 index .JTOPI surged 4.19 percent to 52,683 points, pulling back from a high of 53,072 achieved earlier but still on course for its biggest one-day gain since September 2015. The broader All-share index .JALSH was up 3.3 percent at 59,317 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 .JBANK surged 5.5 percent with Nedbank (NEDJ.J) rising 6.4 percent and rival FirstRand (FSRJ.J) up 6.2 percent.
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 and the progress it makes in pushing through policy reforms.
Deputy president Cyril Ramaphosa, former chairman of African biggest telecoms operator MTN Group (MTNJ.J), is expected to replace Zuma as president on Thursday.
Ramaphosa, who has vowed to fight corruption and revitalize the economy, is seen by business leaders and investors as well placed to turn around the economy. South Africa’s GDP is estimated to grow by less than 1 percent this year.
Another key issue facing the 65-year-old 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.
“Financial markets, investors and business owners are not going to be distracted by the early removal of yet another sitting president for much longer and the attention will turn to what the new order intends to do and when it will do it,” analysts at NKC African Economics said in a note.
In the foreign exchange market, the rand also advanced, extending gains for a second straight day to levels last seen three years ago.
The currency has been rising since December on signs that Zuma – under whose tenure in Africa’s most advanced economy has hardly expanded – was heading towards being ousted.
At 1124 GMT, the rand ZAR=D3 was at 11.6575 against the dollar, 0.5 percent stronger than its New York overnight close and at levels last seen in February 2015.
Additional by Tanisha Heiberg; Editing by Biju Dwarakanath and Alison Williams