Rand and banking shares plummet on Gordhan NPA summons

11 October 2016 - 15:51 By Andries Mahlangu

The rand slid more than 3% against the dollar on Tuesday morning after the National Prosecuting Authority (NPA) summonsed Finance Minister Pravin Gordhan to court to answer to fraud charges over an incident during his tenure as the head of the South African Revenue Service (Sars).

The charges relate to an early retirement payout made by Sars to its former deputy commissioner Ivan Pillay.

"The timing of everything is rather strange with the NPA declaring last week that there was no case against Gordhan. Could this be the first shot fired with the release of the state capture report by [Public Protestor] Thuli Madonsela on Friday?" TreasuryOne dealer Andre Botha asked.

He said this was unfortunate because it could be detrimental to SA in the long run as the rating agencies would be following the case closely. "One can expect SA to have negated all the good work of the past few months with this [news]."

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In its biggest one-day drop since the results of the Brexit vote were announced on June 24‚ the rand slid to R14.33/$‚ its worst level in nearly four weeks.

The rand also weakened substantially against both the euro and the pound.

The big four bank shares were also among the casualties of the news‚ with the entire banking index falling 4.6% before recovering somewhat thereafter.

Based on a total market cap of R740bn the big four banks - Barclays Africa‚ First Rand‚ Nedbank and Standard Bank - gave up about R35bn of their value.

Local banks with foreign shareholding were the hardest hit‚ with Barclays Africa‚ 51% held by Barclays plc‚ down 3.88% at R148.99 at 11.51am. Standard Bank‚ 20% held by the Chinese Industrial and Commercial Bank of China‚ had shed 3.92% to R139.50.

FirstRand was down 3.64% to R45.50 and Nedbank‚ with Old Mutual plc as the majority shareholder‚ 3.36% to R219.09.

Capitec lost 1.92% to R668.65‚ while Investec plc rose 1.85% to R86‚ as it has more offshore exposure than its bigger counterparts.

At 11.54am‚ the banking index was 3.67% lower at 6‚922.20 points. It hit a record high of 8‚574 points in April last year‚ and ended 2015 16.3% lower‚ with a sharp retraction in December following the unexpected removal of Nhlanhla Nene as finance minister.

With the subsequent appointment of Gordhan as finance minister‚ the index has been steadily recovering. Even with Tuesday’s fall‚ the index is still up 13% so far in 2016.

The financial index was also lower on Tuesday at midday‚ but not as hard hit as banks. At 11.58am‚ it was down 1.82%.

Old Mutual was 2.23% lower at R35.14‚ Liberty Holdings 2.23% at R113.04 and Sanlam 1.15% to R63.51.

– TMG Digital/BDlive

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