RMB optimistic over rand
Corporate and investment bank Rand Merchant Bank (RMB) expects the rand to stage a comeback in 2024 and strengthen to R17.75 to the dollar by the end of this year a big ask from present levels of about R19 to the greenback.
Forex sales trader at RMB Keenan Moses told Business Day TV on Thursday that all indication are that the local currency will strengthen this year.
“RMB has the forecast at R17.75/$ at year end 2024. This is obviously on the back of huge caution based on a number of risk events, which include geopolitical risk, elections, not only in SA but around the world as well,” said Moses.
“There is a lot to look forward to this year. RMB is still on the optimistic side that the rand will strengthen.”
RMB’s forecast is in the range put forward by Bank of America. Most SA asset managers expect the rand to strengthen to R17.30/$ in 2024 and for the Reserve Bank to start cutting the repo rate in the second quarte, which will boost consumerfacing stocks and the domestic equity market broadly.
These are the results from the SA Fund Managers Survey, conducted by Bank of America Global Research from November 3 to 9 in 2023.
A strong rand is beneficial to inflation, as the cost of importing goods remains low. Low inflation in turn means interest rates can remain low for longer, benefiting consumers and particularly the poor, as it preserves saving and spending power.
Cape Town-based investment firm M&G Investments Southern Africa, previously Prudential Investment Managers, said last week that based on valuations SA Inc is the place to invest in 2024 rather than offshore, and particularly not in US equities.
The asset manager said several factors have the potential to create tailwinds for SA equities and bonds in the new year, including lower inflation, a continuation of responsible fiscal policy, infrastructure improvements and the start of interest rate cuts globally and locally.
Old Mutual Wealth Investment strategist Izak Odendaal said one silver lining for SA Inc is that the domestic inflation outlook is improving and the global interest rate environment turning. He also believes local rates will begin to come down by midyear.
“The election (probably in May) is a risk event, and it is quite possible that many local and foreign investors will sit on the sidelines until they know what the outcome is. However, we are probably going to end up with more of the same. The ANC should be able to secure a slim majority or retain power with the help of a small coalition partner,” said Odendaal.
“Therefore, the outlook is largely one of broad policy continuity, and ongoing gradual progress in tackling the pressing concerns of load-shedding, a crumbling logistics network, crime, corruption and excess government debt.”