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<p>Commodities have been running hot this week, as the super cycle continues. Well the high commodity prices have added to the concerns of rising inflation and joining CNBC Africa to better paint this picture is Wayne McCurrie, Portfolio Manager at First National Bank Wealth and Investments.</p>


Commodities in super-cycle: Should you buy?

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<p>It&#8217;s the big news story of the day, Daniel Mminele, ABSA group CEO, could we on his way out. This after just a short 15 month stint at the helm at that bank. There are reports of differences in strategy with the board, joining CNBC Africa for further analysis is Wayne Mccurrie, Portfolio Manager at FNB Wealth and Investments.</p>


ABSA CEO Daniel Mminele to step down from position over strategic differences with board

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<p>The Johannesburg Stock Exchange has had its worst third quarter performance in 9 years with a 5 per cent decrease since the end of June.</p>


Where to find value on the JSE in Q4

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<p>Anglo Platinum has delivered a sterling set of results. The platinum group increased headline earnings per share by 120 per cent to R28.15 and they have declared a cash dividend of R3 billion or R11 per share.</p>


Anglo Platinum shines on solid results

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<p>Shoprite has terminated an agreement to buy back deferred shares that are held by its chairman Christo Wiese; this comes after Shoprite failed to garner enough support from its shareholders. The share buy-back deal would have limited the company’s founder Dr Wiese’s, voting rights which currently accounts for 32.2 per cent. Shoprite’s Chairman, Dr Christo Wiese and Wayne Mccurrie from Wealth and Investments at FNB join CNBC Africa for more.</p>


Where to next for billionaire Christo Wiese after share deal is blocked

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<p>Emerging market currencies were rattled on Friday, could this single an interest rate hike for South Africa? FNB Wealth and Investments’ Wayne McCurrie gives his views.</p>


SA’s rand has entered under fair value territory – analyst

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<p>Steinhoff has obtained the backing of its South African lenders to use its local subsidiaries to provide interim liquidity support to its European operations.</p>


Will Steinhoff succeed in wooing lenders for more cash?

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<p>Retail giant Steinhoff’s share price is down over 36 per cent year to date. Today it traded over 60 per cent lower.</p>


Steinhoff CEO departure not reason for share price collapse, irregularities are – analyst

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<p>Joining CNBC Africa for a look at the local markets is Wayne Mccurrie, Senior Portfolio Manager, Ashburton.</p>


Why Zimbabwe is Impala Platinum’s gem

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<p>Joining CNBC Africa for a look at the local markets is Wayne Mccurrie, Senior Portfolio Manager, Ashburton.</p>


Naspers should explain alleged payment to Guptas “quickly”, says shareholder

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<p>Joining CNBC Africa for a look at the local markets is Wayne Mccurrie, Senior Portfolio Manager, Ashburton.</p>


Funding free education with social grants, crazy and unlikely – analyst

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<p>Joining CNBC Africa for a look at the local markets is Wayne Mccurrie, Senior Portfolio Manager, Ashburton.</p>


Net1 will pay social grants into 2018 – analyst

<p>A perfect storm is defined as a rare combination of circumstances which aggravates a situation drastically. Well I think that end 2015 / 2016 was a perfect storm for South Africa. We had, especially at the start of the year, a very rare combination of events for South Africa, all unfortunately bad.</p>
<p>When you get such a rare combination and especially when they are all negative, they are very unlikely to occur again in the near future. Simply put, 2017 must be better than 2016, because it is highly unlikely that these circumstances will occur again in the near future.</p>
<p>The unusual circumstances were:</p>
<ul>
<li>Very low point in the Commodity price cycle.</li>
<li>Excessively undervalued Rand</li>
<li>Drought</li>
<li>Political upheavals</li>
</ul>
<p>As always in economics, these items are interrelated and should not strictly be seen in isolation. The commodity cycle leads to a weaker Rand for example. I have also excluded the interest rate – inflation cycle as this is a normal occurrence. Even this cycle also possibly holds better news for SA next year. It is very possible that interest rates are at a peak and there is a fair possibility that they may even fall next year.</p>
<p><strong>Commodity Cycle</strong></p>
<p>South Africa is a commodity producing country and our economic state is probably influenced the most by this cycle. It is primarily the driver of our economy, exchange rate, interest rates etc.  After a massive bull market, driven by Chinese growth, from 2002 to 2007, commodity prices reached a cyclical low at the start of this year.  This happens probably on average every 8-10 years.</p>
<p>While demand remains reasonable, al the supply planned in the “China” years came on stream and caused prices to collapse. Iron Ore for example peaked at +-$150 per ton in 2007, fell to around $30 per ton at the start of the year and has subsequently recovered to around $70 per ton. This is because mining companies have decreased high cost supply at the low prices prevalent at the start of the year. This continues and as a result most commodity prices have recovered from their lows. </p>
<p>Therefore it is unlikely that we will see the low point of the cycle as we did in January, in the near term future. So 2017 should be better than 2016. We must not expect a surge like we did in the China years. To get this you need a surge in demand. This may occur in the medium term (India, Africa?) but is unlikely over the next few years. The current price recovery that we are seeing is driven by supply cutback and not a demand surge.</p>
<p><strong>Rand</strong></p>
<p>There is no really accurate methodology to measure the “fair value” of a currency, but most valuation methods will indicate an excessive over or under valuation. I tend to use a Purchasing Power Parity basis. This simplistically assumes that any currency should over long periods of time alter by the difference in inflation between the country and its major trading partners. </p>
<p>In January this year, the Rand hit a cyclical low (Undervaluation) point, as low as what is has been in the past. This also happens on average every 8 – 10 years.</p>
<p>This valuation was probably 30% lower than the “fair value” as determined by this method. To date this year the Rand has recovered about half of this undervaluation. </p>
<p>We should also not expect the Rand to appreciate to a level above fair value. You need another China for this to happen. So what we are seeing is a recovery, driven by some stabilisation / recovery in the commodity cycle, from a very undervalued level. This may last a bit longer and the Rand may get a bit stronger, but it is not the start of a major rise, as what happened when Chinese demand surged.</p>
<p><strong>Drought</strong></p>
<p>This was the worst in 15, 20, 50 or 100 years, dependent on your source. In any event is was severe and has most likely behind us. The farmers are out there planting!</p>
<p><strong>Political upheavals</strong></p>
<p>While this seems to be continuing and many will argue differently, in my view the “low point” was the firing of the then Finance Minister in December last year. While plenty of other events have occurred subsequently, the re-appointment and retention of Pravin Gordhan indicates to me that we are also past the worst in this respect.</p>
<p><strong>2017</strong></p>
<p>I am not for a moment saying that 2017 will be a good year, it will just be better than 2016. Hopefully going forward our situation as a country will continue to improve. Who knows, we may start to see economic growth upgrades starting to come through for 2017﻿</p>
<p> </p>


Wayne McCurrie

Commodities in super-cycle: Should you buy?

ABSA CEO Daniel Mminele to step down from position over strategic differences with board

Where to find value on the JSE in Q4

Anglo Platinum shines on solid results

Where to next for billionaire Christo Wiese after share deal is blocked

SA’s rand has entered under fair value territory – analyst

Will Steinhoff succeed in wooing lenders for more cash?

Steinhoff CEO departure not reason for share price collapse, irregularities are – analyst

Why Zimbabwe is Impala Platinum’s gem

Naspers should explain alleged payment to Guptas “quickly”, says shareholder

Funding free education with social grants, crazy and unlikely – analyst

Net1 will pay social grants into 2018 – analyst

2016: S.A's perfect storm – analyst

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Wayne McCurrie

Commodities in super-cycle: Should you buy?

ABSA CEO Daniel Mminele to step down from position over strategic differences with board

Where to find value on the JSE in Q4

Anglo Platinum shines on solid results

Where to next for billionaire Christo Wiese after share deal is blocked

SA’s rand has entered under fair value territory – analyst

Will Steinhoff succeed in wooing lenders for more cash?

Steinhoff CEO departure not reason for share price collapse, irregularities are – analyst

Why Zimbabwe is Impala Platinum’s gem

Naspers should explain alleged payment to Guptas “quickly”, says shareholder

Funding free education with social grants, crazy and unlikely – analyst

Net1 will pay social grants into 2018 – analyst

2016: S.A's perfect storm – analyst

News Tips

Advertise With Us

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