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How to trade Rand hedged stocks

Barry Dumas

The Rand (ZAR) in relation to Rand Hedged Stocks

After looking at my trade idea on Compagnie Financiere Richemont SA (CFR)  I thought that I should share my thought process on coming up with the trade and the relation to the Rand (ZAR) or the USD/ZAR currency pair to be specific for clients starting out.

Let's start with the term Rand Hedge:

Rand hedging means protecting one's investment or portfolio (denominated in Rand) against a weakening currency. So, in our case if the Rand (ZAR) starts to depreciate then we can hedge that risk through certain JSE -Listed companies who derive most of their income and earnings from overseas operations. Richemont is an example of a company that derives almost all their profits outside South Africa.

Example of Rand Hedge Stocks:

  • Aspen Pharmacare Holdings Limited (APN)
  • British American Tobacco PLC (BTI)
  • Naspers Limited (NPN)
  • Compagnie Financiere Richemont SA (CFR)
  • Mondi PLC (MNP)

The Dollar Rand currency pair (USD/ZAR):

The Dollar/ Rand currency pair (USD/ZAR) has been trading sideways between R12.19 and R11.50 from the end of January 2018 as seen in the chart.

It is currently at a key level of resistance at R12.09 and it would need to depreciate further for the Rand Hedge Stocks to move higher.

Tip: When looking to trade Rand Hedge Stocks I always look at what the Rand (ZAR) is doing, if I see a great set-up like on my Richemont trade note and I am buying then I would look for the Rand (ZAR) to depreciate against the Dollar.

The USD/ZAR Chart:

Screen Shot 2018-04-16 at 08.35.39


The Compagnie Financiere Richmont SA JSE:CFR chart:

Screen Shot 2018-04-16 at 08.37.39