ARTICLES

The Rand Tanks

13 August 2018 By PDSNET

The rand has collapsed from R13.38 to the US dollar to levels as low as R15.26 � in less than two days. It has subsequently stabilised at around R14.50. South Africans will naturally think that this has been caused by something that the government has done or that President Ramaphosa has said, but in this case they would be mostly wrong. The current weakness in the rand has been caused by a sudden sharp move from risk-on to risk-off by the international investment community � mainly as a result of President Trump�s decisions to impose sanctions on Russia and continue with his trade war, mainly against China. This, combined with the troubles in Turkey, saw both the Russian ruble and the Turkish lira plummet. And that caused a general sell-off of emerging market assets � including those in South Africa. Emerging markets are seen as being the most vulnerable to a global trade war. The yield on the R186 long bond spiked up from 8,68% to 8,85% as foreign investors pulled their cash out of South Africa and put it into safe investments like the US 10-year treasury bill. As sometimes happens, investors suddenly reached a tipping point and then acted swiftly. The problem is that our currency is very vulnerable to this type of shift in international sentiment � because of our political vacillations, our over-indebtedness, and the government�s intention to advocate expropriation of land without compensation. These are negatives for any overseas investor � obviously. Nobody wants to invest in a country where there is even a remote possibility that his investment might be arbitrarily taken from him/her without any compensation. Technically, this spike in the rand/US$ chart is a problem because it takes the rand clearly through its long-term upper channel line:

Rand Dollar Exchange June 2015 to August 2018 - Chart by ShareFriend Pro

As you can see here the upper channel line which has been in place since January 2016 has been convincingly broken. This indicates that there may well be further weakness in the rand going forward. And that changes everything for private investors. Suddenly, investments in rand hedge shares make sense while companies which import from overseas begin to look very shaky. Our advice, however, is that this risk-off phase may not last too long. Trump is renowned for changing his mind about things � and he may be persuaded to change his mind about this. So just wait and watch for a while and make sure that your stop-loss strategy is firmly in place. Footnote: Of course, this weakness of the rand will certainly translate into a further hike in the petrol price as well.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:

PDSNET ARTICLES

Gold Fields

For the past month, the US dollar price of gold has once again encountered some resistance – this time at around $4000. Despite this, in our view, the gold price is in a strong upward trend which should continue. One of the major factors is the steady decline in the US dollar value against a trade-weighted basket of currencies, but the main reason for the

Top Winning Shares

Last Thursday, the JSE reached a new all-time record high of 114046. This, combined with the fact that the rand went below R17 to the US dollar for the first time since the beginning of 2023 suggests that emerging market investors are increasingly bullish. Consider the chart:

Overview - 10th November 2025

Wall Street

Two weeks ago we suggested in an article that a stock market bubble was developing in AI and predicted that a significant correction was imminent. We repeated that view in the Confidential Report

Bubble

Last Friday the S&P500 reached another new all-time record high, closing at 6791 and reaching a new intra-day record high of 6807. This is obviously an exciting time for private investors, but with each new record high the systematic risk of a bear trend or crash increases. Consider the chart:

The PEG Ratio

Since the government of national unity (GNU) came into power in June 2024, there has been a definite improvement in the South African economy. Perhaps the improvement is not as dramatic as some people were expecting, but the progress cannot be denied.

Possibly the best indicator of that is the 28% rise in the JSE Banking index which, before the GNU had

Rare Earth Elements

Investors worldwide had been of the opinion that Trump’s ability to impact markets was on the decline. His erratic, on-again, off again tariff policies had either disappeared or had been mostly discounted into share prices. His attack on the second largest economy in the world, China, seemed to have been largely resolved, and a meeting with

US Shutdown

There has been much in the media recently about the US government shutdown and the fear among investors that it might begin to affect the stock market, depending on how long it lasts.

A shutdown occurs when the US government reaches its budget limit and requires a bill to be passed through both Houses to extend the government’s spending limits.

New Listings

Two new companies, ASP Isotopes and Greencoat Renewables, have recently come to the JSE. Both are developing companies that have recently made losses and have been funding those losses by raising capital and selling assets. They both have substantial “blue sky” potential but also carry substantial investment risk. This is probably truer of ASP

Exponential Growth

The  S&P 500 index is important because all the stock markets around the world tend to follow it. If the S&P is in a bull trend then London, Tokyo and the JSE will also be in a bull trend – and vice versa.

The S&P500 index began 68 years ago on 4 th March 1957 with an initial value of 43,73. It took nearly

The US Jobs Market

International investors who trade on Wall Street are generally negative about any good news from the economy because it tends to make the monetary policy committee (MPC) more hawkish and less likely to reduce interest rates. The opposite is also true. But there comes a point where bad news is so bad that investors begin to fear that the US economy is heading