Future Forex’s Post

Transcript

Hello again. Well, it is all systems go for the 7th administration that will be governed under the banner of a government of national unity. However, given the country's political uncertainty, there have been concerns of how this could affect the markets and especially our Rand as well. Let's unpack the impact of this move on the currency of the country with the CEO of Future Forex. Harry Shares are Harry. Good afternoon. Welcome to Inc and thank you very much for your time. Just over the last couple of what, 24 hours or two days, we've seen an improved Rand, especially against the US dollar. I mean going below that 18 grand, 18 grand mark. Is this something that we we think the markets can sustain? Hi, Diane. Great to be on. Firstly, I'm hoping it doesn't only sustain at this level, but actually comes down even further as the markets are really loving the look of this government of national unity, mainly led by the ANC, DA and then a number of other parties. So I'm hoping that this is just the beginning of a very strong Rand. OK. Which of the factors were we sort of impact more on our beloved currency? Is it political uncertainty on other times or is it the performance? Of the American dollar. Dan, it's been interesting because the, the, the political landscape in South Africa has been very volatile this year and the Rand has been remarkably stable. It's been sort of between the 18 and 19 mark throughout the year. And it's finally now that the, the government of national unity has been formed, it's finally starting to touch below that a team mark. So we can see that while politics poses a massive amount of movement. In the red, it's not the only factor that's going to move the Rand entirely. So as you alluded to, what happens abroad also affects the Rand quite drastically. And what happens in America in particular regarding global risk on or risk off sentiment, Yeah, I mean, we've seen it trading in a very narrow band as you said over over the year. The the prospects of it going even stronger against the US dollar. Would that depend even on the composition? Of the cabinet that we're still awaiting the news from President Matamala Sil Ramaphosa, and after that the kinds of policies that this GNU would begin to implement. Absolutely down the the ministers that are elected are gonna cause a massive impact on the Rand. And we've seen a bit of pre, pre cabinet jitters I'd call it where the Rand actually went all the way down to 17.95 and today it's back at around 18.1. So it's weakened a little bit while we're waiting for that announcement just to make sure that the right ministers come into the right places according to the market. But the other thing which affects it, as you've alluded to is what happens abroad. So. Effectively, we can do as much as we can locally to ensure the Rand as well, but there's a lot that's not directly in our control, which is global, but risk sentiment, interest rates abroad and in turn interest rates locally. So if we look where we are in the current interest rate cycle in America, we are likely at the top of the inflation cycle and as a result the top of the interest rate cycle, which is good news. It basically means that we expect cuts one or two. Cuts before the end of 2024 in America, which would allow investors to have more of a risk on sentiment and allow people to be more excited by investing in South Africa, which should further strengthen the round over and above what the politics are already doing for the round. Yeah, just on the local politics and up. They anticipated new cabinet for the 7th administration. I wanna take your mind back to 1996 when Trevor Manuel was announced at the finance minister. And the Rand tanked, it really tanked because who is this Trevor Manuel, you know, former UDF ANC activist. And the stories were coming out that this used to be a car guard in his younger days in Cape Town. Or how can he be the finance minister? And within a short space of time he became the beloved finance minister of the markets. I mean, can market sometimes be too knee Jack in their reaction? Absolutely, Dan. I mean, the markets don't know everything. They're guessing at the end of the day, they they see a name and they make a quick assumption based on who that name is. But we can always be proven wrong. I think this might well happen in this cabinet should an unexpected name appear because it's, it's almost the uncertainty. We know for a fact that markets don't like uncertainty. So because of that, if we see a name that we weren't expecting, we can expect a bit of weakening of the Rand even if that might end up being a very strong. Minister it's just the unknown which makes the international investors fear it and as a result the Rand decrease in the short term when this sort of thing happens. Yeah the American election if it affected the dollar I don't know how it would You can inform us now if there could be an impact they're still far away November. But I mean we just ticking down there we don't know what's gonna happen if that happened I mean they they catch a cold and they sneeze I mean the we catch a cold and stuff like that could it be possible that beyond our. Borders. More geopolitical tensions might also affect our currency. Absolutely. There's, there's multiple things that are going to affect us, the American election being one of them. I mean, generally we're seeing in America that the retail sales are slowing down, which which means that we're likely at the top of the cycle. We're basically going to see reduction in inflation and as a result a cutting of rates. So it's all looking very positive. But as you mentioned, I mean anything can happen should the American election go in favour of a party that the market doesn't like. That's something that could, as you say, allow South Africa to catch a cold because they sneezed. So we feel that more than America does. But if everything does go according to plan, if markets continue to do what they're doing, it's looking positive for the Rand, which is a really exciting place to be. Yeah, we have touched on it in a way. But I would like you to this point just to summarize what could be the key risks on the horizon in terms of our currency. Yes. I think, Dan, one of the biggest risks is that this government just doesn't work together well. They block each other too much. Nothing ends up happening, there's no cooperation, and the rest of the country starts basically getting upset with the lack of decision making being made or lack of effective decision making, I should say. And so that's one major risk internally, which could lead to state owned enterprises like Transnet, like Escom becoming even worse, which is really not good. For investor sentiment, but along with that should something happen on a global scale, I mean we saw what COVID, for example, did to the Rand are completely out of our control. All emerging markets got absolutely destroyed by COVID. And and this is something that we can't control, but we have to be aware of is that there these risks that we don't know about that can cause the round to take a bit of a tumble. But like I said, if everything keeps going as it's expected to, if nothing comes out of the woodwork. From nowhere then I do believe we're going to see a strengthening around over time and the 18 to one recurrently seeing will hopefully be just the start of a strengthening Rand. If it strengthens, what would be the next psychological barrier for the rent in your view? For me, if it can hit 17.5 and go below that, I think that will show the market that there's a lot of room to go for the Strand and that it's on a bit of a a bit of A roll. So I'm hoping it can strengthen another $0.50 as the parliamentary placements are made. And as a result, I think it can then become a bit of a snowball effect. So for now, I'm really pushing for it to hit 17.5. That would be great, yeah. Let's hope Cyril Ramaphosa is listening and they are all working together to make sure. We get to 17.5 or less, the Rand to the US dollar. Thank you very much for your time this afternoon. Harry Shaza, he's of course the CEO of Future Forex, just talking about the the prospects of a stronger Rand in line with the GNU. What kind of a cabinet will be formed? Will it be stable or not? Will they really work well together? Time will tell. There are, of course, external factors which are beyond our control.