‘Rand strength not go­ing to last’

Chronicle (Zimbabwe) - - Business -

JO­HAN­NES­BURG. — While the rand has en­joyed a re­cent rally on the back of game-chang­ing lo­cal elec­tions — when look­ing at the long-term trends, its fu­ture re­mains less cer­tain.

This is ac­cord­ing to anal­y­sis from global re­search firm, No­mura, which says the rand’s re­cent “ex­tra­or­di­nary strength” has been caused with lit­tle in­flow.

No­mura said that its pre­vi­ous long-term out­look for the cur­rency — which pegged a 2016 close at R17 to the dol­lar — has not changed.

“We do not be­lieve the cur­rent rally has se­ri­ous domestic idiosyn­cratic driv­ers and in­vestors are in­stead sim­ply carry hunt­ing,” said No­mura strate­gist for Africa, Peter At­tard Mon­talto.

Look­ing at the zoomed-out trend-line of the rand’s per­for­mance since 2011, “things look sur­pris­ingly calm for most of it”, At­tard Mon­talto said.

“Marikana barely reg­is­ters at this alti­tude, nor load­shed­ding. What we do see, how­ever, is an ac­cel­er­a­tion of weak­ness in ZAR from Au­gust last year.”

“This long-run trend was bro­ken by the first Ja­panese-led flash-crash at that time on Au­gust 24 2015 and things ac­cel­er­ated higher from there through rat­ings down­grades, rat­ings watches, a build­ing sense of a low growth/no jobs growth nar­ra­tive and prob­lems mount­ing at paras­tatals,” the an­a­lyst said.

This was all be­fore Nene-gate, which oc­curred on De­cem­ber 9, caus­ing the USD/ZAR to rise to a peak on Jan­uary 11, 2016.

No­mura’s bleak pro­jec­tions for the rand are based on a set fun­da­men­tals in the South African econ­omy, which re­main un­changed.

High un­em­ploy­ment, zero growth, and views that the coun­try faces a likely rat­ings down­grade in De­cem­ber still per­sist.

“Th­ese still stand, even af­ter the re­cent elec­tions. We be­lieve the pos­i­tive long-run im­pact of th­ese elec­tions will take too long to af­fect growth and the vul­ner­a­bil­ity of the coun­try — we think the sta­tus quo will last too long,” it said.

Pre­vi­ously, No­mura saw an elec­tion out­come where the ANC lost power in two met­ros as a mixed re­sult for South Africa: on the pos­i­tive side, it rep­re­sented a shift in the po­lit­i­cal land­scape that left Pres­i­dent Ja­cob Zuma in a weaker po­si­tion — seen as pos­i­tive for in­vestors.

How­ever, on the neg­a­tive side, the re­sult has left ma­jor met­ros in hang­ing, with no clear winner.

This will force coali­tions be­tween par­ties with con­trast­ing views and poli­cies, which could cre­ate a tur­bu­lent economic land­scape, mov­ing for­ward. — Busi­nessTech

Newspapers in English

Newspapers from Zimbabwe

© PressReader. All rights reserved.