The Intelligence Report – 8 January 2018

08 Jan 2018

  • South Africa: too soon to jump for joy – assessing the sustainability of current market levels and identifying the factors needed to maintain or extend the recent strength of the South African rand.
  • Energy sector equities: running on empty? – reviewing the performance of the energy sector over the past year, examining the supply and demand dynamics, and hinting at what to expect in 2018.
Last month’s election of Cyril Ramaphosa to lead the ruling ANC party in South Africa – an event which investors had partially, but not fully, anticipated – has led to an explosive rally in South African asset prices. The rand enjoyed its strongest six-week gains in recent history. Against this heady backdrop, Marina Chernyak assesses the sustainability of current market levels and identifies the factors needed to maintain or extend the recent strength. By contrast, there is little market euphoria built into the current pricing of energy shares, at least in general. In the second of our Intelligence Report articles, Daniel Morris reviews the performance of the sector over the past year, particularly the experience of lacklustre returns despite broadly rallying crude oil prices. A closer examination of the supply and demand dynamics and the associated changes in the shape of the futures curve yields tentative explanations of this conundrum and hints of what to expect in 2018.
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