Guarding Against Uncertainty​ Where Should You Put Your Money?

The recent downward slump in the rand, which started when finance minister Pravin Gordhan was recalled from an investment roadshow overseas, is a stark reminder that the local currency is vulnerable and susceptible to any number of forces. So into which stocks and sectors should investors put their hard-earned cash?

- Marcia Klein

As increasing offshore exposure is the name of the game for JSE listed companies, the rand’s direction is critical when it comes to picking investments.

The slump in the rand in the last week of March, following President Jacob Zuma’s decision to recall finance minister Pravin Gordhan and his deputy Mcebisi Jonas from an international investor roadshow, was a timeous reminder that despite a prolonged period of rand strength, nothing is certain or stable when it comes to our currency.

It is generally acknowledged that after its escalation from testing R17 to the dollar at the start of 2016 to R12.30 prior to the end of March’s slump, the rand was at more than fair value.

Sean Ashton, chief investment officer at Anchor Capital, says the purchasing power parity fair value of the rand is around R12.65, “so the risk at this point when positioning portfolios is of one becoming too bullish at the wrong point in the cycle”.

Traditional rand hedge stocks have been relatively poor performers on the JSE over the past year as the rand continued to show strength. But a period of rand weakness could be around the corner.

The big question is when. What is certain, according to a number of experts, is that investors should be turning their attention to rand hedges, and as Ashburton Investments senior portfolio manager Wayne McCurrie suggests, it may be advisable to stagger investment in rand hedge stocks over the next few months because it is impossible to predict the point at which the cycle turns.

TO INVEST OR TO HANG ON TO CASH?