Rand becomes buy for world's biggest money manager

Johannesburg - A “panic” selloff of African currencies and fixed-income assets has made the rand a buy for the world’s biggest money manager.

The recent market turmoil represented a “dramatic overshoot” and means that the continent offers “some amazing investment opportunities”, Scott Thiel, the London-based deputy chief investment officer at BlackRock, said in a speech in Johannesburg on Monday.

The rand has weakened 13% this quarter amid falling commodity prices, a slowdown in China and the prospect of a Federal Reserve rate increase that would draw investment to the dollar. The Fed rate rise, which may come as soon as this month, would have a “calming” effect on panicky markets, Thiel said.

“We are long the South African rand on the view that we’re not at an equilibrium, even taking into account the fall in energy prices,” Thiel said. “I would venture to say the day the Fed raises interest rates the South Africa rand will be stronger.”

The rand gained on Tuesday for the first time in four days, strengthening 0.7% to R13.8780 per dollar after slumping as much as 1.2% on Monday to more than R14 against the US currency. Yields on benchmark government rand bonds dropped three basis points from an 18-month high to 8.57%.

Yields in developed nations have hardly moved and are underpinned by their central banks, damping investor returns, Thiel said. That makes African fixed-income assets attractive, he said.

“We look at assets we think are not repressed and are also going to hit that more traditional 5% return target,” he said.