Gold, hedge stocks gain
GOLD and rand hedge stocks rocketed yesterday afternoon on negative sentiment and a global sell-off in emerging market and commodity currencies.
The JSE gained more than 1.5%, while the gold index rose 11%. SABMiller and British American Tobacco were up 2.05% and 2.6% respectively.
“From a JSE perspective, we’ve been buffered by good performance in rand hedge stocks across resources and the industrial sector,” Nedbank Capital’s Mohammed Nalla said.
GOLD and rand-hedge stocks rocketed yesterday afternoon on negative sentiment and a global selloff in emerging market and commodity currencies.
The rand fell below R10.00/$ for the first time since 2009 following a special media briefing by President Jacob Zuma to address investors concerns about the mining sector and the economy in general.
At the same time, the JSE gained more than 1.5%, with its gold index gaining a staggering 11%, and SAB Miller and British American Tobacco (BAT), which both have significant exposure to overseas markets, rising 2.05% and 2.60%, respectively. Over the last month BAT has gained more than 11% while SAB has gained almost 6% on the back of continued rand weakness.
“From a JSE perspective, we’ve been buffered by good performance in rand hedge stocks across resources and the industrial sector,” said Mohammed Nalla‚ head of strategic research for global markets at Nedbank Capital. “This is largely as a result of rand weakness.”
The rand has been in freefall for the past three weeks due to international factors that have seen emerging market and commodity currencies come under pressure.
Domestic factors such as a growing current account deficit, which measures the difference between imports and exports of goods and services, a low growth rate and fears of violent social and labour unrest, have made the currency particularly vulnerable to investor sentiment.
The rand breached the R10.00/$ level shortly after Mr Zuma told journalists at the Union Buildings that SA needed faster growth and a stable‚ growing mining sector.
Although the rand’s move yes- terday cannot be entirely attributable to Mr Zuma’s remarks, his speech provided little comfort to anxious markets.
“The market was expecting more substance in his speech which resulted in a bearish outlook after he spoke,” said Mr Nalla.
Treasury released its monthly statement of revenue, expenditure and borrowing, which showed that the budget deficit was far higher than anticipated and economic growth figures, released on Tuesday showed that the economy grew only 0.9% in the first quarter of this year‚ well below expectations. Many economists now expect growth of just 2% this year.
The rand is not the only currency to have come under pressure. The Australian dollar has lost more than 7.5% against the dollar in the last month, while the Mexican peso has fallen almost 3% in the last week. “The rand has been moving with other emerging and commodity markets, but is underperforming due to idiosyncratic factors, said Investec Asset Management portfolio manager, Vivienne Taberer. “The only currency we’ve held our own against this year is the Japanese yen.”