If there's one single factor that drives the overall performance of listed companies on the JSE, it's the rand. The correlation between the rand's performance and the all share index is astounding.
The weaker the rand, the stronger the market (see graph).
That illustrates just how geared listed SA companies are to foreign markets. It also shows that investors will jump to equities if they perceive the value of cash to be falling.
So there was a small run in the JSE during 2001 - the rand's worst year ever - at the same time as global markets were crashing. But the rand's recovery last year brought the bears back to the market.
It's also had some vicious responses from the companies. As the rand plumbed new lows, corporates complained, even while pocketing huge foreign exchange gains and grasping at export markets.
But the prospect of real corporate pain is stronger with the strengthening of the rand last year and in the first few months of 2003.
It's why pressure will remain on Reserve Bank governor Tito Mboweni to lower interest rates, a move that sets the domestic economy free as well as weakening the rand. The downside is inflation, should the economy overheat.
While the rand was collapsing, resources stocks and other rand hedge stocks did especially well, giving them their dominant position on the Top Performers table. Their earnings in hard currencies were translated into significantly higher rand earnings.
Consider the platinum stocks Implats, Gencor, Mvelaphanda, AngloPlat and Northam. Gold counters like Harmony and Gold Fields also rushed up the turnover rankings.
Cullinan, a small company based on tourism, was also a beneficiary of the weak rand. Cullinan has been through many metamorphoses, from refractory manufacturer through portable braai maker to its current tourism guise. Its brands include Thompson Tours and Pentravel.
For Cullinan and Tourvest, Sisa and City Lodge, t he question now is whether the high volumes of inbound tourists will be maintained in the face of a stronger rand. Many industry participants believe the weak rand attracted tourists who would have come anyway, just later.
So who will be enjoying the strong rand? Motor companies like McCarthy and retailers like Pick 'n Pay should be, as many of their products are priced in dollars.
A stronger rand means wider margins, especially if they don't pass savings on to consumers.
