South African rand, bonds gain as President Ramaphosa's future is discussed



JOHANNESBURG, Dec 5 (Reuters) - South Africa's rand and government bonds strengthened on Monday, as a meeting of the executive committee of the country's governing party took place to decide the fate of President Cyril Ramaphosa.

South Africa's governing African National Congress (ANC) party convened its National Executive Committee to discuss a panel report that found evidence Ramaphosa may have committed misconduct and violated the oath of office.

At 1504 GMT, by which time the meeting's result had not yet been announced, the rand ZAR=D3 traded at 17.350 against the U.S. dollar, 1.14% stronger than its previous close, having touched 17.18 during the session.

Investors have been on tenterhooks over developments surrounding the president, with the rand falling more than 4% on Thursday against the dollar, before recovering.

"We believe that the political landscape will probably remain turbulent in the final weeks of this year, weighing on investor sentiment towards South Africa and resulting in increased market volatility," analysts at Nedbank said in a research note.

The Johannesburg Stock Exchange ended the day slightly higher, with the all-share index .JALSH up 0.5% to 75,369 points and the top-40 index .JTOPI up 0.45% to 69,220 points.

Engineering and mining contractor Murray & Roberts MURJ.J led the decliners on the exchange, its shares plunging 21.05% to 3.75 rand after Italy's biggest construction group Webuild WBD.MI said it has

dropped the proposed acquisition

of Australian rival Clough, which is owned by Murray & Roberts.

Government bonds also rose on Monday, with the yield of the benchmark 2030 bond ZAR2030= closing up 22.5 basis points to 10.58%.

South Africa's dollar-denominated bonds were up as much as 1 cent, having risen

as much as 2 cents

in the morning. Longer dated bonds had strengthened more, with the 2049 maturity US836205BB97=TE up 1.074 cents to 75.052 cents in the dollar, according to Tradeweb data.

'CONUNDRUM'

"The market is still willing to give (Ramaphosa) the benefit of the doubt, to some degree at least," said Yvette Babb, an emerging markets fixed income portfolio manager with William Blair.

"But I think at this point in time the market does still perceive him to be the most credible candidate within the ANC and therefore would still prefer him above most other alternatives."

"The conundrum for the ANC is that recent polls of its supporters show that President Ramaphosa remains its strongest drawcard for national elections in 1Q24," JP Morgan analysts said in a note to clients.

"While potential alternative ANC candidates do not differ substantially on policy direction, uncertainty over the effectiveness of policy and reform implementation would rise if there were to be a prolonged political vacuum."

Elsewhere, South African private sector activity recovered slightly in November, although output fell for a third straight month due to rolling power cuts and port strikes, the S&P Global South Africa PMI survey showed on Monday.

Meanwhile, the dollar index =USD fell as low as 104.1 as China's easing of some of its COVID-19 curbs boosted risk sentiment, before recovering to trade 0.383% higher at 104.87.
Reporting by Bhargav Acharya, Rachel Savage and Nqobile Dludla; Additional reporting by Susan Mathew in Bangalore; Editing by Crispian Balmer and Toby Chopra

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