Hedges have their lim­its

Finweek English Edition - - MARKETPLACE SIMON SAYS - Editorial@fin­week.co.za

Sasol* pub­lished up­dates re­gard­ing the oil and cur­rency hedges it has en­tered. While hedges are a great tool, in­vestors must un­der­stand that they are very lim­it­ing in their longer-term im­pact. Sure, these hedges will pro­tect a fair bit of the com­pany’s earn­ings for the next year, but the point is that they ex­pire in time. So, any hedge can only pro­tect prof­its for a limited pe­riod be­fore it ex­pires and mar­ket prices again take con­trol. That said, I do like hedges, but if oil or the rand has moved markedly by the time they ex­pire, the new hedges will be at these new lev­els and as such in­vestors shouldn’t get too ex­cited about them.

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