Sasol shares in the spotlight

(Stephanie de Sakutin, AFP)
(Stephanie de Sakutin, AFP)

A Fin24 user wonders what could happen to Sasol shares. He writes:

How low can Sasol [JSE:SOL] shares go considering the lower oil price and the weak rand?

Rob Price of ETM Analytics responds:

From a fundamental macroeconomic, oil price and rand perspective:

The rand price of oil (50.5%) has actually dropped relatively more than Sasol (38.6%) from the June 2014 peak.

While the relationship between the Sasol and the rand price of oil is not a perfect correlation, this does suggest that there remain downside risks for Sasol despite the recent drop in the share price.

If the rand price of oil were to remain at current levels, a drop to R350 on Sasol is possible.

Going forward, independently there remain downside risks for both the oil price and the rand, with the risks probably more tilted towards rand weakness.

A rise in the rand price of oil could favour Sasol over the coming months, but investors may want to see the relationship mentioned above stabilise before becoming less bearish on Sasol.

READ: Sasol unit trust and capital gains tax
 
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