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Rand volatility ‘can only get worse’

Maudi Lentsoane looks at Monday’s market performance by Telkom, Lewis and Vodacom.

NASTASSIA ARENDSE:  Good evening and welcome to the SAfm Market Update with Moneyweb. My name is Nastassia Arendse.

I’m joined on the line by Maudi Lentsoane, who is the CEO of Lehumo Investments, to take us through the day’s market performance. Maudi, thanks so much for your time.

MAUDI LENTSOANE:  Thanks for having me, Nastassia, and good evening to our listeners.

NASTASSIA ARENDSE:  How did we do today on the market?

MAUDI LENTSOANE:  Where do we start? The rand?

NASTASSIA ARENDSE:  Let’s start with the rand.

MAUDI LENTSOANE:  The rand had a very, very bumpy trading session. All things were stacked up against the rand, though there was a lot of negativity.

First of all, we heard of the events that unfolded over the weekend, with the media reports as to the reasons behind the resignation of Treasury’s deputy director-general, Michael Sachs.

Read: BLSA sees downgrade risk from latest Treasury resignation

Then there was an Eskom story which was negative – Eskom doesn’t have enough money. All negative for the rand.

Read: Eskom not insolvent but facing cash-flow trouble

We saw quite a volatile trading session. It touched R14.31 – that was the low. Then on the upside we had R14.57. I think we are currently sitting at R14.50. So quite a volatile session for our local unit. But it’s to be expected and I think it can only get worse. You’ve got the rating agencies’ D-day on November 24, next week Friday. That’s when we get to learn our fate – whether we get downgraded into junk status or we are given another reprieve. But it certainly is going to be a very bumpy couple of weeks for the rand.

Overall, in terms of the markets, we finished I would say flat. The JSE all-share index was flat, at 59 821.

Because of the rand, we had all those rand-hedge stocks, the likes of the resources counters, up 0.4% – that’s where the Resources 20 was at the end of the day. The industrials were also up slightly, call it 18 points up.

South African stocks, the ones that are facing the South African economy more, were negative – the banks, the retailers all coming under heavy pressure.

Read: SA banks prepare for the worst as junk rating looms

The gold mining index was up just over 1%, and platinum was negative, just over 1% down.

NASTASSIA ARENDSE:  Interims were out from Tongaat Hulett, the Lewis Group and Vodacom.

MAUDI LENTSOANE:  Probably no surprise that the Telkom share price was a big loser on the day, down 6.5%.

So yes, those South African companies were under a lot of pressure. We had Lewis coming through with results – I must say, it’s just the story of how tough the trading conditions are in South Africa. Lewis is a credit retailer and they continued to be impacted negatively by the economy that’s not growing that well.

What is quite positive, though, when you look at their numbers, is the fact that they seem to be really taking good care of the debt book. That’s certainly being well managed. They are managing their credit book. It’s not running away from them. Debt costs are also declining, improving by about 11.5%. So the collection rates are also improving. It tells you that the National Credit Regulator and the NCA are certainly working in their favour, and of course they are beginning to really tighten their lending policies.

The other one was Vodacom. That came up with interim results for the six months ending September. We’ve also seen some improvements there, profits growing slightly. They are increasing their data revenue. 

NASTASSIA ARENDSE:  Maudi, I’m sorry but we actually have Shameel Joosub coming up next, so he’ll be able to paint more colour on the company. But thanks so much for your time this evening.

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