South Africa: Nationalising mines?

This comes via Brown Bothers Harriman’s Win Thin (no link available):

South Africa’s ruling ANC said that it was open to discussing demands by its labor union allies to nationalize its mines.  This is an astounding admission, and confirms our worst political fears with regards to the new Zuma administration.  First, they get rid of respected Fin Min Manuel, now they’re talking about nationalization?  Add in poor economic fundamentals (recession, stubbornly high inflation, and a widening current account gap) and you get a recipe for a weaker rand, in our view.  And yet since Mar 9, when the dollar peaked vs. EM and right after US equity markets bottomed, ZAR has been the top EM performer, up 33% vs. USD.  Next is HUF (up 25%).  

While the rand has been on fire, we simply don’t see much in the way of rationale for the rand to be doing so well except for high interest rates.  Given the recent turn in EM currencies as a whole, we think the rand could remain under some pressure near-term.  We would buy USD/ZAR at current levels for a move to 8.30, the June 23 high.  Intermediate target seen at 8.055 (62% retracement of the Jun 23-30 drop).  Longer-term, a big target is the May 15 high of 8.80, and intermediate targets on that path are 8.10, 8.235, and 8.37 (retracement levels of the May-Jun drop).

The situation sounds pretty rand bearish, doesn’t it. 

And, by the way, if you were looking for a market where house prices rose to astronomical levels and still have not yet declined significantly, then look no further. South Africa is the place.  In the 8 years to 2005, when the U.S. market peaked, South Africa was the market with the largest run-up in prices, a staggering 263%, well above second-place Ireland at 196% and third-place Spain at 171%.

But these days are well and truly over.

Source

Global house prices: A home-grown problem – The Economist (subscription required)