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Dramatic week for the markets

Temporary set back for the Rand.

SIKI MGABADELI: Let’s just check the markets then. It’s a bit of a stuttering end to the week. AllShare up 0.04%, that’s like nothing, to 55 806. The Top 40 index up a tenth of a percent, the rand at R14.15/dollar, R18.59/pound and R15.87/euro.

The gold price $1 322.63/oz, platinum $1 069.80/oz and Brent crude at $50.01/barrel. Wayne a stutter to the end of this, it’s been a dramatic week.

WAYNE MCCURRIE:  Thank goodness, we need some R&R. I definitely think we need some rest and relaxation.

SIKI MGABADELI: Wayne there are two big things and we’ll talk a little bit about what people are expecting from the Fed and Janet Yellen and all of that. But we’ve had our own drama here at home. Remember how excited I was about the rand, for weeks…

WAYNE MCCURRIE:  And don’t worry the rand will come back, this is a temporary setback and it’s not as though we haven’t seen this before. So I’m actually very confident that this is just a power struggle somehow and we’ll all survive because the fundamentals are actually turning better for South Africa.

So it doesn’t mean things are going to be good, they’re just going to be better. In other words, drought, rand, high inflation, higher interest rates, these things are actually turning around, and most important of all, commodity prices are going up. That’s what truly counts for South Africa so we must not become overly pessimistic about today’s happenings.

As we’ve spoken about – we’ve seen it before and the fundamentals are actually turning in favour of the rand and luckily enough in favour of South Africa.

SIKI MGABADELI: Of South Africa. And I like what you said about we’ve seen this before because I think there needs to be a distinction made between the way that investors look at a situation, what’s already priced in, what we’ve seen before, how we’ve reacted so when something similar happens the next time we go, all right we’ve seen this pattern before.

WAYNE MCCURRIE:  Yes and also remember, markets are funny things. The rand has strengthened significantly and maybe the market was just looking for a reason to take some profits because you’ve had a good 20% strengthening in the rand. People who were fortunate enough to have bought the rand at the beginning of this year have actually made a nice tidy profit and maybe they’re just taking some money off the table and this was the trigger for it. Because nothing fundamentally is changing, this is just the trigger.

Of course we could be wrong and the whole thing could end up in a complete and utter catastrophe. But we must also look back at our history in South Africa. To be totally honest, by and large we’ve avoided catastrophes.

Somehow we’ve bumbled through and avoided total and utter catastrophes and just in the very recent past we avoided a credit downgrade and there’s a whole lot of other things.

Unfortunately when we as South African’s experience these things day-to-day we do tend to become a little bit pessimistic…

SIKI MGABADELI: Yes, it feels a little bit despairing.

WAYNE MCCURRIE:  And you must remember even though I don’t want to underemphasise how important these things are or how material they are. When overseas investors look in South Africa and compare us to many other countries, things are actually not that bad here.

SIKI MGABADELI: Yes. Now because of the drama this week I’ve been avoiding TV the whole day, so I don’t know if Janet Yellen has spoken yet at Jackson Hole…

WAYNE MCCURRIE:  Yes, she has started to talk.

SIKI MGABADELI: What are we expecting, are we still seeing a rate hike in September?

WAYNE MCCURRIE:  I don’t know about September, that I don’t know but it is coming. Janet Yellen is talking in a place called Jacksons Hole in Wyoming which is the middle of the United States, in the middle of nowhere. All the world’s central bankers are there and she’s giving a speech.

And by and large what she has said is that the US economy is doing ok, the goals that were set by the Fed have by and large been achieved and low interest rates are no longer necessary for the economy. So we are going to increase them but we are going to increase them at a very measured rate.

So maybe it’s a little bit more in favour of higher interest rates than what we’ve seen previously but it’s clearly not new news.

The rand has weakened a tiny bit but it’s not material. The gold price hasn’t done much and the US share markets are actually going up a little bit on the back of this, but to be honest there is no real new news in all of this.

SIKI MGABADELI: That comes out of it. All right lets hope we have a restful week next week.

WAYNE MCCURRIE:  Restful weekend and next week we can all just be calm and relaxed.

SIKI MGABADELI: Thank you so much, Wayne McCurrie is with Momentum Wealth.

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