JSE rand-hedge stocks soar
INVESTORS in the JSE’s “rand-hedge” stocks have hit the jackpot with the rand’s 15% slump this year.
Shares of Naspers, Richemont and Sasol have gained between 30% and 80% due to the rand’s depreciation against the dollar, helping JSE’s rand-hedge equities outperform their emerging market peers, and with the all share index rising more than 13% this year.
INVESTORS in the JSE’s “randhedge” stocks hit the jackpot with the rand’s 15% slump this year.
Shares of multimedia conglomerate Naspers, luxury goods maker Richemont and the world’s largest producer of synthetic motor fuel, Sasol, have gained between 30% and 80% this year on the JSE, boosted by the rand’s depreciation against the dollar.
The local currency, which some predict will weaken to R10.50 in the next six months, has helped the JSE’s rand-hedge equities to outperform their emergingmarket peers, with the all share index climbing more than 13% since the beginning of January.
Momentum Asset Management’s Wayne McCurrie said there have been two sets of rand hedges — dually listed counters — that have performed well this year and led the all share index to record highs, with the last record being reached on September 26.
“In the first six months of the year, industrial rand hedges like Richemont, Naspers, British American Tobacco and SABMiller rallied on the back of a strong world recovery and a weaker rand,” he said,
Earlier this year, the eurozone, SA’s largest trading partner, emerged from an 18-month recession, with recent economic data from the US also signalling a recovery in the world’s largest economy.
Due to a backdrop of poor fundamentals, such as a wide currentaccount deficit, high unemployment and rising inflation, SA’s growth trajectory has lagged, with the International Monetary Fund forecasting growth to slow to 2% from an original projection of 2.5% this year.
Mr McCurrie said that in the past few months it has been commodity shares such as Sasol, BHP Billiton and Anglo American that have pushed the market to new highs following a stabilisation in China.
Rand-hedge gains in diversified mining group Anglo American have, however been limited, with the stock shedding 5% since January due to lower commodity prices, rising input costs and work stoppages due to labour unrest.
However, analysts believe the long-term view for SA’s equity market is less optimistic due to an expected interest rate rise which is expected to bring the equity bull run to a halt.
The tapering of US stimulus, which analysts expect the US Federal Reserve to announce in December, will see a withdrawal of liquidity from the market.
“Fed tapering is in effect interest rates going up,” Mr McCurrie said, adding that it will mean there will be less money in the markets and “markets perform well when there is a lot of cheap money”.