SUNDAY TIMES – Possible Zuma recall sparks bullish sentiment

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Societe Generale SA, Credit Agricole SA and Citigroup are betting on a resurgence in the rand, which has lost 4% of its value since he sparked a crisis with a cabinet reshuffle in March.

Talk that Zuma might be removed has increased the appeal of the country ‘s assets, said SocGen strategists Jason Daw and Phoenix Kalen, who recommended selling the dollar for the rand and buying longer-dated bonds.

The currency surged to a one-month high yesterday as debt yields dropped to two-month lows.

Opposition to Zuma’s leadership has mounted within the ANC’s ranks following his decision to fire Pravin Gordhan as finance minister, a move that prompted S&P Global Ratings and Fitch Ratings to downgrade the nation to junk. The party’s leaders will discuss Zuma’s future this week, said senior party officials.

“The chances of Zuma being ousted are slim, but the fact that some members of the national executive committee are openly discussing the possibility has boosted sentiment towards South African assets,” the SocGen strategists wrote.

Citigroup strategists wrote: “It is still our base assumption that Zuma will stay president until 2019, but further signals of dissent within the ANC may warm up the Zuma trade once again.”

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