JSE’S BEST HOPE
BRIAN KANTOR: This is what it will take for Reserve Bank to cut rates
Lower interest rates are essential in justifying current market levels
The JSE’s recent performance has disappointed local shareholders. Since 1995, the all-share index has had severe drawdowns, but over time more than made up for these to produce impressive average real returns of the order of 10% a year. Since early 2016, the JSE has moved little in either direction. However, moving sideways presents differently when converted into US dollars, helped by a stronger rand — up 20% from 2016’s worst levels. In dollars, the index has risen 24% since January 2016, a gain that compares well with the emerging market benchmark — up 28% over the same period — and the 19% gain of the S&P 500 at the same time. Judged by the performance of the rand compared with other emerging-market currencies, the risks of doing business in SA rose significantly in December 2015 and then receded markedly. SA’s explicit risk spread is now no higher than it was in mid-2015. The five-year Yankee (dollar-denominated) RSA bond now offers a yield of 3.7% a year. The safe-haven five-y...
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