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S. African market rallies after 3rd finance minister appointed in week

Xinhua, December 15, 2015 Adjust font size:

South Africa's rand and stock market improved on Monday following the appointment of Pravin Gordhan as the third finance minister within a week.

On Monday, the rand rose up to 15.30 to the U.S. dollar in the afternoon after a week of depreciation, while the financial index at the Johannesburg Stock Exchange (JSE) gained around eight percent.

President Jacob Zuma on Sunday night named Gordhan to replace David van Rooyen, a little-known MP who had only been in the job for four days.

Gordhan, former Minister of Cooperative Governance and Traditional Affairs, served as finance minister from 2009 to 2014.

On Dec. 9, Zuma fired then Finance Minister Nhlanhla Nene in an abrupt move that sparked an uproar and sent rand to record lows of 16 to the dollar on Friday.

There had been "some extreme movement in the markets" after the sacking of Nene, said Donna Oosthuyse, Director of Capital Markets at JSE.

She said the stock market was correcting and the rand strengthening after Gordhan took office.

Gordhan has pledged sound fiscal management and not to cut pro-poor and growth inducing programs.

However Oosthuyse said "it remains to be seen how the markets will continue to respond to the new minister."

"The markets have not recovered all the way to where they were. They responded positively but will wait for policies and fiscal execution," she said.

She warned about the repercussions of financial instability.

"Market losses put strain on credit extension and interest rates, and raise borrowing costs for companies and individuals," she said.

International rating agency Fitch last week downgraded four of South Africa's major banks from triple B status to triple B-minus status.

But Oosthuyse was optimistic the situation would improve for the banks.

"South African banks are well-capitalized and managed. The country has a reputation of well-managed and sound capital markets with good regulation. It was also known for prudent and consistent treasury," she said. Endit