David Bacher assesses Crash of Rand, SA shares in May – storm warning or great opportunity?

The quiet in March and April proved to be the calm before May’s storm with all hell breaking loose on investment markets – and any Rand-related asset taking a hammering. David Bacher of Corion shares the hard numbers and offers insights into whether May’s wipeout is a warning of worse to come for JSE-listed shares, or a juicy buying opportunity. He spoke to Alec Hogg of BizNews.


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Relevant timestamps from the interview

  • 01:02 – David Bacher on the investment challenges of May
  • 02:13 – Bacher on the falling rand and its consequences on the market
  • 06:31 – On Asset Return trends on global and local equities
  • 09:04 – On the current state of SA equities and the stock market
  • 15:32 – On inflows and outflows in May
  • 16:55 – On what’s keeping him up at night
  • 18:54 – On the impact of politics on investment

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Excerpts from the interview

David Bacher reflects on the Rand crash and the month of May

It was a very challenging month for investors and it was one of those months that it was actually quite easy to look either like a genius or a fool by getting one decision right. And that was how much of your assets you had offshore. Otherwise, you really, really struggled. And this was obviously due to the weakness of our Rand, which was, in the opinion of Corion, the standout event of the month. And that affected all South African assets, particularly the interest rate sensitive shares and our government bonds.

Read more: Corion’s David Bacher on “no news is good news” April – and runs a line through Alec Hogg’s FFM picks

Bacher on SA Equity value being down 4% over the last month

It’s actually probably worse than it appears. You have South African equities down 3.9%, [and] that’s using the FTSE All-share index, which is an index that’s quite heavily weighted to gold shares and Richemont. If you take a broader index, an equally weighted index, or a Capped SWIX index [which] most asset managers actually use as a benchmark, you’re down closer to 7%. So, even that divergence is probably understating how important your allocation between offshore and local assets were.

Read more: South Africa’s crushed markets: Ready for a remarkable recovery?

On what’s keeping him up at night

I think we’re looking at the bond yields. That’s really your pricing of South African risk. Over the last month, our long ten-year bond yields have gone up about 90 basis points. That’s a big development. If our bond yields start decreasing, I think that’s a sign of a healthier environment where foreigners will come back. At the moment, if you’re buying a South African ten-year, you’re getting a real return of five and a half percent that’s historically a very, very attractive rate. But that doesn’t bode well for offshore investors and how you value shares because your interest rates are high, your discount rates are high, valuations tend to be lower. 

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