Old Mutual suffer as political tensions take over

Monday, 3rd April 2017 15:07 - by Rajan Dhall

Old Mutual (OML) shares fell sharply today off the back of political tensions in South Africa. President Zuma has recently fired finance minister Gordhan with South Africa's Deputy President Cyril Ramaphosa describing the sacking as "totally unacceptable", all a big mess then! Alongside his sacking the ZAR fell 5% and there was turmoil for any stock related to the region.

His replacement is a man who has very little economic experience but is seen to be a bit of a puppet. All of this has come of the back of Gordhan being involved in various scandals (police investigations) and Zuma stating that Gordhan's recent trips to London have been to undermine his authority.

Going forward it is my view that there will be allot of pressure on Zuma and he may even be ousted himself as the people are losing confidence fast. This will not help companies like Standard Chartered and Old Mutual as they are reliant on business in the region. The Co. (Old Mutual) was founded in South Africa and own Nedbank which has a huge exposure, there is also a big exposure to their insurance arm. Also keep an eye on Mondi and Anglo American who both do business in SA.

Looking at the Chart it seems we may have slightly further to go, especially as next Friday Moody's the ratings agency are set the rate the country. I am looking at the mean value level of 195 at least for a test further down 184.56 looks good over time for a bounce but we need to see if the country stabilises first. Overall this presents a good opportunity to invest in a good company at low levels when the political tensions settle down.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.