QE infinity and SAs last chance
Last week we initiated a long USD/ZAR trade as we believed the market was pricing in too many positives.
After the sobering news from the medium-term budget speech, it promptly lost over 60 cents.
Traders who used futures would have made over 30% as our initial profit target was reached in just over a day.
The Rand is strengthening on the back of Moody's just reducing the outlook from stable to negative and the USA Federal Reserve decreased interest rates last week for the third time this year. The target rate is between 1.5% and 1.75%.
After September's liquidity squeeze in the Repo market, the Fed has injected much needed liquidity.
And has committed to buying $60 billion a month until the second quarter 2020.
With the ECB poised to start aggressively expanding its balance sheet this month we should see interest rates remain under pressure.
This is positive for emerging markets as investors hunt for yield and growth. As soon as the US and China trade war is resolved, we could see a significant amount of money rushing into emerging markets.
It’s also good for emerging market governments as it allows them to access cheaper credit.
This could be South Africa’s last chance to right the ship, with a few tail winds.
Grow your portfolio with these JSE “Safe Haven” investment opportunities
For investors looking for simple offshore exposure with downside protection and pre-determined returns, there are three new “Safe Haven” investments available to investors.
These are the latest Autocall structured products from Investec, for investors looking for downside protection, offshore exposure and possibly benefit from Rand depreciation.
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All fees are built into the price, so you get exposure to 100% of your investment amount and all returns are quoted net of fees.