Weekly Thoughts 07 April 2017

There is and has been lots of conversation and comment and speculation around the political turmoil we’re experiencing and the potential economic consequences. Asset managers are keeping their offshore allowances at the maximum, due to the expectation of Rand weakening. Many South African equity funds also own shares of numerous South African listed companies that actually earn most of their revenue from outside South Africa, from external global economic activity or influence. Plus many of these funds directly own companies that are listed outside of South Africa, for example on the US or European or UK stock exchanges. This all means that the South African equity funds in your portfolios are well positioned to benefit from a depreciation of the Rand and thus an increase in fund value. Asset managers that have been expecting these happenings have also prepared themselves by avoiding South African government bonds and other asset classes that they think will suffer.

Investec put out a good commentary for those that would like to read a view on a stable Treasury and some political viewpoint and a history of fiscal policy in South Africa:


I, as I do with many things in life, try not to get too concerned by what I can do nothing about. What will I achieve through the stress? Furthermore, the economic consequences I might experience by any turmoil on the horizon will pale into insignificance compared to what the poorer man in the street would be experiencing.