Want to Know What Investors See for the Rand? Follow This Stock

South African rand banknotes and coins sit in the till of a retail store in Johannesburg, South Africa.

Photographer: Waldo Swiegers/Bloomberg

If you want to know what investors are thinking about prospects for South Africa’s rand as the ruling African National Congress’ leadership battle unfolds, look no further than Cie Financiere Richemont SA’s Johannesburg share price.

The company has the highest correlation to movements in the rand among stocks in the FTSE/JSE Africa Top 40 Index of South Africa’s biggest listed companies, according to data compiled by Bloomberg. The correlation this month rose to the highest since January.

Richemont, the Geneva-based owner of luxury brands such as Cartier and Montblanc, and Naspers Ltd. are among companies whose shares have surged as the rand weakened in recent weeks, helping to propel the benchmark stock index to a record. The so-called rand hedges protect investors against rand weakness because most of their revenue is earned abroad in foreign currencies.

The rand has slumped 8 percent against the dollar this half amid stagnant economic growth, a widening fiscal deficit and rising political risks as the ANC prepares to elect a new leader in December. Richemont’s share price has climbed 19 percent in that period.

“Of the big rand hedges, Richemont is probably the purest non-South African company,” said Wayne McCurrie, head of portfolio management at Ashburton Investments Management, which oversees about $10 billion. Richemont was founded in 1988 when South Africa’s Rembrandt Group Ltd. spun off its international assets, and is listed in Johannesburg and Zurich.

— With assistance by Dana El Baltaji

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