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Africa: South Africa’s Currency, Equity and Bond Markets Ride the U.S. Election Wave

A nail-biting US election ended up buoying South African assets all round, with the equity and bond markets rallying and the rand moving to its firmest level since the pandemic struck. The surprises delivered by the voting results, such as a divided US government, have been interpreted by investors as favourable for risk assets, all else being equal.

Far from proving a third panic event of the year, after Covid-19 and the September overvaluation correction, the US elections provided an initial turbo-boost to global stock markets and a promising fillip to risk assets, such as emerging market equities, bonds and currencies.

South Africa’s stock market rallied strongly, the rand appreciated past the R16 to the dollar level to R15.51 — its strongest level since end-February 2020 — and the local bond market experienced inflows of almost R10-billion.

All of this took place against a backdrop of an election that held many surprises and a post-election political hiatus that signals more to come. Despite a convincing win for Joe Biden, President Donald Trump has refused to concede and looks set to fight until the bitter end, firing his Secretary of Defence and paving the way for the Justice Department to take…