Looking specifically at the Rand /Pound currency pair there is so much volatility to be aware of. The perceived increase in the likelihood of a hard Brexit seems to have punished the Pound yesterday but we all know that the fundamentals of the UK are strong, this presents a great buying opportunity. The Rand on the back of the recent emerging market uptick is relatively strong but this will be short lived.
The recent announcement to further bail out Eskom (and other SOE’s) without the required rescue plan being implemented has certainly drawn sharp criticism from the ratings agencies and the SA economy is fundamentally in trouble as lackluster growth (or not) continues amid ongoing policy confusion. Until the President speaks to his tax payers and skilled citizens we will continue to see this downward spiral driven by negative sentiment and that’s not to mention the unacceptable levels of crime all over South Africa.
Also, overseas investors have sold a net $4.8bn of South African equities and bonds in 2019, the most on a year-to-date basis in data going back to 1998, according to data compiled by Bloomberg. Outflows, particularly from fixed-income securities, have accelerated since the start of June as ratings companies and banks turned more bearish about South Africa’s fiscal outlook.
With the low growth in SA there is a real possibility that the SARB will follow the major reserve banks and lower interest rates in the medium term. This would result in downward pressure on the ZAR, adding to the urgency to take action in repatriating your funds offshore.