Lately, the debate about offshore investing has become a hot topic again. It seems like every time there is a hint of bad news in South Africa, the floodgates open, and money pours out of our country.
The government has realised the importance of collaboration with the private industry for SA’s survival. Due to financial limitations, the government has opened its doors to the private sector, inviting them to contribute to repairing what has been broken. This is a beacon of hope and a potential catalyst for the much-needed revival of our economy. Hopefully, the same trend will continue when the NHI eventually comes into play.
The graph below depicts the movements of the rand/dollar exchange rate from 2000 to the present. It shows four significant recovery periods during which the rand strengthened considerably and maintained this level for a substantial period of time.I would like to remind you that to break even, a loss of 30% requires a profit of 43% to break even while a loss of 54% requires a profit of 117% to break even.
We are currently experiencing a rand recovery of 8% over the last year and 6% over the last month. I am not sure where this will end, but the rand is currently considered to be undervalued, and the SA market and markets outside the S&P 500 seem cheap. The UK market, as are some other counters, is trading at a 40% discount to the US market.
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