News24
14 Aug 2019, 17:43 GMT+10
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.
Eskom needs government support to stabilise its debt - Moody's
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.
Though foreign ownership is already the lowest this year, the selloff has continued unabated. Inflows have turned into net outflows of 3.2 billion rand for the year in August - even at a time when a world awash with negative yields is fueling demand for riskier assets such as emerging-market debt.
In dollar terms, South African local-currency bonds have under-performed all major emerging markets in August except Argentina's. Yields on benchmark government securities have risen 111 basis points this month, while the rand has depreciated 5.5% against the dollar, further eroding returns for foreign investors.
Get a daily dose of Hawaii Telegraph news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Hawaii Telegraph.
More InformationMOSCOW, Russia: This week, Russia became the first country to officially recognize the Taliban as the government of Afghanistan since...
CAIRO, Egypt: This week, both Hamas and Israel shared their views ahead of expected peace talks about a new U.S.-backed ceasefire plan....
WASHINGTON, D.C.: The Trump administration has made public a visa decision that would usually be kept private. It did this to send...
MADRID, Spain: Liverpool footballer Diogo Jota and his younger brother, André Silva, have died in a car accident in Spain. Spanish...
LONDON, U.K.: An unrelenting heatwave sweeping across Europe has pushed early summer temperatures to historic highs, triggering deadly...
President Donald Trump's plans to build a space-based Golden Dome missile defense shield have drawn immediate criticism from China,...
NEW YORK CITY, New York: With just weeks to spare before a potential government default, U.S. lawmakers passed a sweeping tax and spending...
PARIS, France: Fast-fashion giant Shein has been fined 40 million euros by France's antitrust authority over deceptive discount practices...
PALO ALTO/TEL AVIV: The battle for top AI talent has claimed another high-profile casualty—this time at Safe Superintelligence (SSI),...
FRANKLIN, Tennessee: Hundreds of thousands of Nissan and Infiniti vehicles are being recalled across the United States due to a potential...
REDMOND, Washington: Microsoft is the latest tech giant to announce significant job cuts, as the financial strain of building next-generation...
LONDON UK - U.S. stock markets were closed on Friday for Independence Day. Global Forex Markets Wrap Up Friday with Greeback Comeback...