UBS says the rand continues to reflect a higher risk premium on concerns a left-leaning party could join the GNU. (Javier Ghersi/ Getty Images)
Swiss investment bank UBS says a “very positive outcome” for the rand is now less likely, given the uncertainty that surrounds President Cyril Ramaphosa’s proposed government of national unity (GNU).
UBS analyst Tilmann Kolb says the bank is advising investors to wait out the political wrangling and refrain from taking directional exposure to the rand at this point. This as the local currency continues to reflect a higher risk premium, given the possibility that of a left-leaning party such as the EFF or MK Party (MK) in the GNU. Investec CEO Fani Titi also told Talk Radio 702 on Monday that SA could not afford the instability and uncertainty that has seen coalitions in metros such as Johannesburg and Ekurhuleni implode in recent years.
“Recent dynamics have made a very positive outcome for the rand less likely, in our view,” Kolb wrote in a research note dated 7 June. “We think a government that includes the EFF could weigh further on the rand, especially if the DA is not involved. The participation in government of [MK] can’t be fully ruled out, either.”
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