I got this from my weekly Stanlib newsletter (it's a goodie) www.stanlib.co.za:
Please see below reasons for the current Rand strength. I have also attached a slide which shows R52 billion of net foreign flows into S.A equities:
(download)
- SA is now running a trade surplus due to sharply declining imports. First trade surplus since early 2004
- SA dividend outflows have fallen sharply from well over 3% of GDP in 2008 to well under 2% of GDP in Q2 2009
- SA`s current account deficit has improved dramatically from 7% of GDP in Q1 2009 to 3.2% of GDP in Q2 2009
- SA is running a positive interest rate spread when measured against the major developed economies
- SA's foreign currency credit rating was upgraded on 16 July to an `A' rating
- Foreign tourism inflows have improved noticeably this year, helped by the sporting events
- There has been a large increase in investment flows into emerging markets this year, including SA. Year-to-date foreign investors has purchased (net) almost R60bn of SA equities; reversing the outflows we saw last year.
- SA's foreign exchange reserves has risen significantly to over $36 billion in August 2009 (including the extra SDP allocation from the IMF)
- SA's banking, financial system and fiscal balances have weathered the global financial crisis extremely well
- The possible MTN/Bharti deal (for which exchange control approval has been sought) could have led to additional `speculative' strength
Current outlook for the Rand:
- A uniquely large range of Rand-positive factors are currently combining to impact the currency (a near perfect-storm)
- These positive factors are expected to remain mostly `in-play' for the next 3 to 6 months.
- The Dollar is expected to remain under pressure over the next 3 to 6 months
- The technical fair-value for the Rand is around R8.20/$. Hence the Rand is currently considered to be over-bought or technically over-valued
- We are currently forecasting a Rand/Dollar rate of around R8.00/$ by year-end 2009 and R8.40 by end 2010
- The Rand remains an extremely volatile currency by emerging-market-currency standards; we don't expect that this will change. Internationally the Rand is viewed as the key `risk' trade currency
- The Rand was the worst performing emerging market currency in 2008 and up until early September 2009 was the second best performing emerging market currency
- The perfect-storm of positive factors are expected to slowly dissipate over the coming 18 months, especially as the economy recovers and imports rise. However, we do not expect to see a significant deterioration
Good news peeps...!