Jean Temkin
6 July 2009
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Johannesburg — THE tables are turning as emerging markets, particularly Asia and its economies, show signs of stronger recovery than those of the west. As they decouple, emerging markets are already beginning to become less dependent on the US.
"Decoupling is happening for real," says Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs.
The World Bank forecasts that economies using the euro and dollar will contract 4,5% and 3% respectively, while China and India will grow 7,2% and 5,1% respectively. Manufacturing activity in the latter two countries was reported to be on the mend, which, hopefully for us, could mean that as demand for our resources continues to dry up in the west, they will be heading east instead.
But we have a problem. As well as strengthening against the currency of our traditional trading partner, Europe, the rand has strengthened about 20% against the Chinese yuan and about 18% against the Indian rupee in the past six months. Worse still, the rand is still gaining against the dollar, the currency for which we sell our resources, while producer costs are in rands.
Although I have used gold for the example, the chart applies to everything we export in dollars. As you can see, up until April the dollar gold price and the rand gold price almost moved in unison. Since then the dollar gold price has mostly been rising and the rand gold price dropping. The rand gold price has lost 20% in the past three months while the dollar gold price has gained slightly. It may be good for our ego that our currency is so well thought of, but it brings gloom to our exporters.
Gloom for exporters is joy for importers. In three months the rand has improved 20% against the dollar, slashing the prices of items bought abroad. Bell underwent a rise in volume, but its price only nudged upwards. Hudaco gave its buy signal a couple of weeks ago and, while slightly overbought, looks set to continue upwards. Massmart and Mr Price , which import merchandise, are in strong bull trends and Clicks is challenging its record high on high volume.
Resources lost ground last week, and the Resources 20 index sat itself down on a support at about 4000. Despite its June sell signal from its jagged future plotting and equilibrium of 41608, a collapse looks unlikely. Rather note the index's support at 35868 and resistance at 47348.
In financials, life insurance is drawing in investment. Old Mututal's volume leapt as accumulation overturned supply, but its future plotting warns of a possible price softening. Met-Ltd has confirmed a bull trend and given a buy signal but it may tip slightly easier before it makes its way towards R12,40, when it will give a count to almost R16.
Naspers has reached a record high as it makes its way towards its R233 count, but overbought, may lose some ground before continuing up. Aspen is nudging back from its record high and may lose a little more.
Jean Temkin is the author of More Charting for Profit, a textbook on technical analysis. She holds Bell, Hudaco and Met- Ltd.
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