Current Market Status

[WES]

I am no expert, so please help me, the way I understand the current market situation.......the foreigners are heavy invested in our equities because the yield of our equities are much greater than they would be earning anywhere else, causing super prices on our equities, at the same time the rand is strenghtning causing their yield to be eroded slowly, at some point the foreigners will yank their money out of our market to chase better yield somwhere else, and our equity prices will drop to levels that will make sense when compared to earnings...

[geordie1]

does rand strength erode yield for foreigners-I thought it would improve yield to foreigners depending on their currency??

[#3]

If it was a weakening dollar then yes the rand strengthens and it stays the same. 1 reason is much higher interest rates in South Africa compared to where they are.....

[WES]

yes, you are right

[geordie1]

ok then if rand weakens there could be a rush of selling by foreigners at some point in future and yes that would put pressure on equity prices-I agree tghey are a bit toppish at moment

[Rams]

I find all of this very wishy washy because it is so multifactorial, dollar weak because gold strong and gold strong because dollar weak and rand strong because interest rate too high and interest rate too high because rand srong!What about oil price and dollar strenght.Equities are high because foreigners are buying and foreigners are buying because equities are low.Where does it end. PRICE?

[WES]

At the end of the day a share price has to be sustained by the earnings of the company, otherwise we might as well go gambling at the casino....surely if you look at Aspen and Shoprite, the earnings can not sustain a share price that is nearly R 100...their price has to be driven by bulls on the stampede that have overshot the fair value.

[THRESHOLD]

The yield on our equities is not "high" actually. What is drawing foreign money is the PEG adjusted forward yield. This means that any doubt about future growth would cause large value adjustments at spot and this could lead to a nasty drop in valuations.