With the Reserve Bank meeting the media this afternoon to announce if there will be a change in interest rates, and a growing expectation that there may be a hike this year, Investment Solutions has raised the possibility of the rand slipping further – to as low as R13 to the dollar. Chief Investment Officer Glenn Silverman told a media briefing this morning that the global environment will “swamp” domestic influences, and we should be focused on what happens in the US. He is predicting that as there is a slowdown in the pumping of money into the system by the US Federal Reserve– known in the jargon as tapering – there could be a fall of 10% to 15% in the S&P 500, which might be expected to lead to a similar slide on the JSE. However, he argued that the rand might act as a “shock absorber” for the JSE, weakening to cushion the impact. In such a scenario, we might see the local currency fall to around R13 to the dollar. However, Silverman believes it could be a year of two halves, and following a possible decline in the rand in the first half of 2014, it could revive to around R11 to the dollar in the second half. “It may go down first, and then up later,” he suggested. Investment Solutions’ Market and Research Analyst Brad Fainsinger had earlier given the results of the multi manager’s survey of 20 top-rated ZA fund managers about their outlook for this year. This revealed that they expect a rise in global growth, leading to a 2.5% to 3.5% rise in ZA GDP. Inflation could break out of the 3% to 6% target range, coming in at between 6% and 7%, and there is also an expectation that interest rates will be hiked this year. (Ignore this last bit if you are reading ZA Confidential after this afternoon’s announcement from the Reserve Bank and they surprised us all with a hike…..). The fund managers expect the rand to return to a R10 to R11 to the dollar range. The fund managers expect a rise in the JSE all share index, although they anticipate a slowdown on the rates of growth of recent years. Resources are the most favoured sector, and industrials the least favoured. However Fainsinger pointed to a big contrast within resources, with gold being least liked of any sector and platinum shining through as the most favoured.
Tweets of the Day:
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