Fund Managers Shun SA Stocks Due To Over-Valued Rand

by Carla Johnson, Investors Offshore.com

25 August 2003

Fears that the South African rand is over-valued and may be ready for a sharp correction against the dollar has prompted some fund managers to avoid investing in the nation's stocks, a Bloomberg report has revealed.

Assessing local market conditions, Jonathan Asante, manager of Framlington Group's emerging markets fund said that South Africa's currency is "way overvalued", and stated that he will only begin to buy local stocks again when the rand has dropped in value.

According to Bloomberg, by the end of last week, the rand had gained 14% against the dollar since the start of the year, the fifth highest increase over the 59 currencies studied. Moreover, since December 2001, the rand has appreciated some 87% against the greenback. It is thought that this is a contributory factor in the FTSE/JSE Africa All Share Index's lacklustre performance this year, which has fallen 6% when measured in local currency terms. This makes it the worst performing market amongst those measured by Bloomberg.

Consequently, Asante revealed that South African stocks made up 13% of his fund by the end of June this year, compared to a peak level of 17% one year ago.

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