Foreigners dumping R2bn a day in SA bonds as junk status looms

Chris_the_Brit

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Mar 6, 2004
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Investors have been dumping South African government bonds at a rate of almost R2bn a day in August.

With issuance increasing and a downgrade to junk a looming possibility, non residents have sold a net R14.4bn of the debt in August so far, according to JSE Ltd. data compiled by Bloomberg. That’s an average of R1.8bn a day. The sales have wiped out inflows at a time when the country needs foreign investment to close a current-account deficit that was equivalent to 2.9% of gross domestic product in the first quarter.

The government increased the amount of local-currency debt sold at weekly auctions by 37% last week to help pay for a R128bn bailout for Eskom Holdings, the state-owned electricity company. That will push up borrowing and widen the budget deficit, placing the country’s last-remaining investment-grade rating at risk. Moody’s Investors Service, which rates South Africa’s debt at Baa3, is reviewing its assessment in November.

Foreign ownership of South African government debt fell to 37.9% at the end of July, the lowest level this year, from as high as 42.8% in March 2018, according to National Treasury data. Foreigners are exiting despite yields that are among the highest in emerging markets, suggesting they’re worried a downgrade to junk would see the nation’s bonds kicked out of indexes that track investment-grade debt, such as Citigroup Inc.’s World Government Bond Index.
Source: https://www.fin24.com/Economy/foreigners-are-dumping-billions-in-sa-bonds-as-junk-status-looms-20190814
 

surface

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So, non-residents sold bonds. Does it mean residents bought those bonds? And hypothetically speaking, if non-residents held 92% of bonds (if such a thing is permissible), then wouldn't there be another hullabaloo?
 

Messugga

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So, non-residents sold stock. Does it mean residents bought that stock? And hypothetically speaking, if non-residents held 92% of stock (if such a thing is permissible), then wouldn't there be another hullabaloo?
Bonds aren't stock.
 

signates

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sorry bonds, edited. I mean who bought these bonds then? locals ? Is that information not available?
Financial institutions would act as market makers in the bond market and buy up the available liquidity in the market.
 

krycor

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Someone is selling, and someone is buying...
Some funds are forced to and so need to get ahead of the forced sale.. others are seeing the impending drama coming and weighing up risks.
 

SAguy

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Nov 4, 2013
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All this just pushes us closer to prescribed assets - like the 50 odd percent prescribed assets in the 80's that didn't go well.

But hey - it will probably make the ANC more popular with the masses as it will take away from those who have pensions and the ANC will do just enough to make the poor look like they're doing it for them - while losing 90% of it to corruption.
 

Messugga

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I've stopped the last of my regular local investments this month. Money is going out of country as it makes sense in terms of exchange rate.
It's simply way safer to not have all your eggs in one basket, or even where the government can get hold of it.
 
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