TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentral TechCentral
    NEWSLETTER
    • News

      Pick n Pay partners with Takealot in online shopping push

      17 May 2022

      Everything PC S01E02 – ‘AMD: Ryzen from the dead – part 2’

      17 May 2022

      Elon Musk is becoming like Henry Ford – and that’s not a good thing

      17 May 2022

      WhatsApp Premium: new subscription plan in development

      17 May 2022

      Fibre break knocks out Telkom’s network

      17 May 2022
    • World

      Musk tells Twitter: prove your bot claims, or the deal is off

      17 May 2022

      Intel shareholders reject pay packages for top executives

      17 May 2022

      Musk hints at reduced offer price for Twitter

      17 May 2022

      SpaceX gets $125-billion valuation in private placement

      17 May 2022

      Crypto’s wild week offers a much-needed warning

      16 May 2022
    • In-depth

      Stablecoins wend wobbly way into the unknown

      17 May 2022

      The standard model of particle physics may be broken

      11 May 2022

      Meet Jared Birchall, Elon Musk’s personal ‘fixer’

      6 May 2022

      Twitter takeover was brash and fast, with Musk calling the shots

      26 April 2022

      Musk wants free speech on Twitter but spent years silencing critics

      21 April 2022
    • Podcasts

      Everything PC S01E01 – ‘AMD: Ryzen from the dead – part 1’

      10 May 2022

      Llew Claasen on how exchange controls are harming SA tech start-ups

      2 May 2022

      The inside scoop on OVEX’s big expansion plans

      20 April 2022

      Decentralised finance, the ‘end of banks’ – and what comes next

      25 March 2022

      Maxtec and BigFix: helping stop cyberattackers in their tracks

      18 March 2022
    • Opinion

      From spectrum to roads, why fixing SA’s problems is an uphill battle

      19 April 2022

      How AI is being deployed in the fight against cybercriminals

      8 April 2022

      Cash is still king … but not for much longer

      31 March 2022

      Icasa on the role of TV white spaces and dynamic spectrum access

      31 March 2022

      Minister Ntshavheni is at risk of tripping up

      24 March 2022
    • Company Hubs
      • 1-grid
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»News»SA’s sins forgotten as rand surges

    SA’s sins forgotten as rand surges

    News By Agency Staff2 August 2016
    Facebook Twitter LinkedIn WhatsApp Telegram Email

    rand-640

    The currency that was forecast to perform the worst in emerging markets this year is also the one benefiting most from the clamour to boost returns in the wake of the UK’s Brexit vote.

    The rand has strengthened by 4,9% against the dollar since the day before the UK voted to leave the European Union on 23 June, the most among 31 major and developing-nation currencies tracked by Bloomberg and bringing gains this year to 11% , trailing only Brazil’s real and the yen.

    Yet analysts still see the currency giving up those gains through the rest of the year.

    The odds are stacked against the rand. Africa’s most industrialised economy contracted in the first quarter amid a slump in commodity prices and the worst drought on record, and the country may have its credit-rating downgraded to junk in December.

    A municipal election on Wednesday is adding to political risks after President Jacob Zuma roiled markets in December by firing a respected finance minister. For now, that hasn’t deterred the wall of money seeking returns as developed-nation policy makers keep interest rates low to stimulate their economies.

    “Investors are not paying attention to the underlying fundamentals or the possible risks but just diving head-first into the pursuit of returns,” said Peter Rosenstreich, head of market strategy at Swissquote Bank in Gland, Switzerland, whose strategy is to “invest with the markets”.

    “It’s whitewashing a lot of emerging market sins.”

    Reduced bets for US rate increases and prospects for more stimulus in Europe, the UK and Asia are spurring demand for higher-yielding assets. Foreign investors bought a net R9,1bn of South African bonds in July, bringing inflows this year to R50,2bn, compared with R13bn in the same period in 2015, helping to prop up the currency.

    South Africa’s central bank has raised its policy rate twice this year to 7%, offering attractive returns for investors who borrow dollars to buy higher-yielding currencies. The rand returned 6,7% for carry-trade investors in July, more than double that of the next-best currency, the South Korean won, data compiled by Bloomberg shows.

    “It’s mainly about the carry trade,” said Piotr Matys, a currency strategist at Rabobank in London. “The rand is one of the most liquid currencies and one of the highest yielders. Such a combination makes it very attractive in the current ultra-low-yields global environment.”

    The rand’s 25% plunge against the dollar last year helped boost exports, with a record monthly trade surplus in May followed by another higher-than-expected positive balance in June. The manufacturing purchasing managers’ index, which fell to a five-year low in December, has been above the 50 level that indicates expansion for five straight months through June, while inflation has slowed from a seven-year high in February.

    Still, the longer-term outlook is gloomy. The South African Reserve Bank forecasts 0% growth this year, while the International Monetary Fund predicts expansion of just 0,1%, the slowest since the 2009 recession and not nearly enough to make a dent in the unemployment rate of 27%.

    S&P Global Ratings cut its assessment of South Africa’s debt to its lowest investment-grade level last year, with a negative outlook, while Fitch Ratings also has the nation just one step above junk.

    Fresh risks

    Nationwide local government elections, seen as a barometer of support for the ANC, are creating fresh risks.

    ANC losses could fuel calls for Zuma, 72, to be ousted before his current presidential term ends in 2019. He’s faced demands to quit since the nation’s top court ruled in March that he violated the constitution by refusing to repay taxpayer money spent on upgrading his private home.

    Opposition gains may also force the ANC to rethink its policies, such as plans to cut the budget deficit.

    Those concerns are relatively benign compared with those in countries such as Turkey, where President Tayyip Erdogan is cracking down on political opponents following a failed coup, according to Medley Global Advisers.

    “The market implications will probably be fairly modest in the near term,” said Nigel Rendell, a London-based senior emerging markets analyst at Medley. “South Africa is still a relatively attractive investment, largely because the rest of the world is so unattractive. It’s probably still worth going for it.”  — (c) 2016 Bloomberg LP

    IMF Jacob Zuma Medley Global Advisers Nigel Rendell Piotr Matys Rabobank Reserve Bank
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleAfrica’s mobile race is far from over
    Next Article New iPhone app to control Apple TV using Siri

    Related Posts

    Pick n Pay partners with Takealot in online shopping push

    17 May 2022

    Everything PC S01E02 – ‘AMD: Ryzen from the dead – part 2’

    17 May 2022

    Elon Musk is becoming like Henry Ford – and that’s not a good thing

    17 May 2022
    Add A Comment

    Comments are closed.

    Promoted

    Detect and prioritise cloud security risks in minutes, not months

    17 May 2022

    Eye on the future: an interview with PureSoftware CTO Tushar Bhatkar

    17 May 2022

    Accelerating test automation

    16 May 2022
    Opinion

    From spectrum to roads, why fixing SA’s problems is an uphill battle

    19 April 2022

    How AI is being deployed in the fight against cybercriminals

    8 April 2022

    Cash is still king … but not for much longer

    31 March 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.