Ramaphosa's win perhaps buys South Africa time to avoid further
Most Asian markets extended gains Tuesday, taking a lead from fresh records on Wall Street where a long-awaited tax-cut bill is expected to be passed this week.
After months of uncertainty, the controversial fiscal reforms are due to be voted on in the next few days. They could be on Donald Trump’s desk for signature before year-end, giving the embattled US president his first major legislative victory.
“Equity markets have started the week in an extremely enthusiastic manner, anticipating tax reform holiday cheer,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
“There’s a definite buzz on the street as we approach the finishing line, as there are few if any signs of buyer fatigue.”
All three main indexes on Wall Street ended at record levels for a second successive day and those advances filtered through to Asia.
Hong Kong added 0.7 percent and Shanghai ended up 0.9 percent, while Sydney put on 0.5 percent and Singapore edged up 0.1 percent.
But Tokyo ended down 0.2 percent after jumping 1.6 percent Monday on the back of a pick-up in the dollar against the yen. Wellington, Bangkok and Jakarta rose but Taipei and Manila were lower.
In early European trade London and Frankfurt were flat, while Paris slipped 0.2 percent.
Rand surges
However, while equity markets are pushing ever higher the dollar is struggling to break out against its peers.
Despite a series of positive developments, Greg McKenna, chief market strategist at AxiTrader, said forex traders may not be as excited about the outlook as their stock-dealing counterparts.
“Not (excited by) the actual growth level, not the fact the Federal Reserve is so far ahead of the (European Central Bank or Bank of Japan) when it comes to monetary policy, not what the Fed says it is going to do, and not that the tax plan could add an additional impetus to growth,” he said.
The dollar, which rallied Friday on news that Republican senators had the votes to pass the tax bill, struggled against the yen, euro and pound.
It also lost more than one percent against the rand as investors cheered news that the businessman Cyril Ramaphosa had been elected president of the ruling ANC, putting him on course to take over from Jacob Zuma to lead the country.
The rand had already strengthened by 2.8 percent on Monday.
The win has led to hopes the market-friendly Ramaphosa can turn around the struggling economy, though analysts were guarded about his chances of success.
“Ramaphosa’s election, in and of itself, is positive,” Christian Diclementi at AllianceBernstein told Bloomberg News.
“But the mix of new leaders at the top of the ANC is not quite what the market would have liked. Ramaphosa’s win perhaps buys South Africa time to avoid further (credit) downgrades, but it’s difficult to see how that can be avoided altogether.”
© Agence France-Presse