Rampant dollar (#513)

JSE Direct with Simon Brown

Simon Shares

• Remgro (JSE code: REM) plans to unbundle its stake in Grindrod (JSE code: GND). There were ideas that maybe Remgro would take out Grindrod, but the unbundling is going in a different direction and Remgro unbundles shares they don't want. Remember also that after the unbundling expect weakness in the Grindrod share price for a few weeks.
  • They've held them since 2011 and hold a 24.81% stake
  • For every 100 Remgro you'll receive 30.70841 Grindrod shares.
  • Last day to trade (LDT) is 11 October 2022.
  • You'll receive them with a base cost that Remgro paid, that value is still to be determined.
• Barloworld (JSE code: BAW) trading update is not bad. The big news is that they plan to list Avis by year-end.
• Tiger Brands (JSE code: TBS) trading update was solid off a low base. The chart looks bullish as it rose +10% on Monday after the update. Chart looking decent and a potential delisting target?
• The UK is an absolute mess.

Here the UK 5, 10 & 30 year bonds for September .(with correct carts) . Just September pic.twitter.com/hMj5yP65bC

— Simon Brown (@SimonPB) September 28, 2022

Rampant Dollar

The US$ Index (code: DXY) is at twenty-year highs and within a few percent taking out the highs from the early 2000s and heading back to levels last seen in the mid-1980s.

The reasons are simple and two-fold;

• The world is scared and fear sees investors rushing to the safety of the US$.
• Rising rates in the US now see the US ten-year treasury bills trading around 4%, the highest level in over a decade. So investors can flee to the US$ and buy 10-year bills for a ±4% return.

Importantly this is hitting every currency in the world.

Has earnings implications for US companies selling products offshore as those profits are now lower due to US strength.

When does the strength stop?

• In the short-term a pullback is likely.
• But as long as fears remain the strength will continue and could continue well into next year.

What to do?

• Don't panic.
• Consider some JSE listed currency ETFs.
• Continue with your offshoring strategy.

The tables have turned. Emerging markets are much more resilient against the US Dollar than the rest of the G10. Year-to-date, the Dollar has risen a stunning 15% against the G10 (black), but only 5% against emerging markets (blue). EM is the new standard bearer for stability... pic.twitter.com/ToaQvQB9DS

— Robin Brooks (@RobinBrooksIIF) September 27, 2022