{"id":407131,"date":"2020-06-12T07:24:27","date_gmt":"2020-06-12T05:24:27","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=407131"},"modified":"2020-06-12T07:25:06","modified_gmt":"2020-06-12T05:25:06","slug":"investors-are-piling-back-into-south-africa-heres-why","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/407131\/investors-are-piling-back-into-south-africa-heres-why\/","title":{"rendered":"Investors are piling back into South Africa &#8211; here&#8217;s why"},"content":{"rendered":"<p>It\u2019s as if South Africa\u2019s downgrade to junk never happened.<\/p>\n<p>The country is now paying less to borrow in the local-currency than at any time in the five years before Moody\u2019s Investors Service removed its last investment-level rating on 27 March.<\/p>\n<p>The rand has rebounded, risk premia have returned to pre-downgrade levels, and foreign investors are streaming back into the country\u2019s bond market after a record selloff in the first five months of the year.<\/p>\n<p>That shows how global developments &#8211; specifically, the emerging-market rally sparked by global monetary and fiscal stimulus and a weaker dollar &#8211; matter more than domestic risks.<\/p>\n<p>It\u2019s also good news for President Cyril Ramaphosa, who\u2019s had to increase borrowing as an economic slump, worsened by the Covid-19 lockdown, curtails tax revenue.<\/p>\n<p><a  data-lightbox=\"post-image\" href=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-407133 aligncenter\" src=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk.jpg\" alt=\"\" width=\"814\" height=\"457\" srcset=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk.jpg 814w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-300x168.jpg 300w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-768x431.jpg 768w\" sizes=\"auto, (max-width: 814px) 100vw, 814px\" \/><\/a><\/p>\n<p>With the loss of the last investment rating and South Africa\u2019s subsequent expulsion from the FTSE World Government Bond Index out of the way, the rand\u2019s idiosyncratic risks have diminished and the currency is once again a \u201cbellwether for global recovery,\u201d according to Societe Generale SA.<\/p>\n<p>\u201cAlthough South Africa\u2019s fiscal position grows increasingly perilous, fiscal dynamics are likely to be less potent a rand driver than the path of the global recovery post-pandemic,\u201d Societe Generale strategists led by Jason Daw wrote in a report.<\/p>\n<p>The Paris-based lender recommends an overweight position in South African sovereign credit.<\/p>\n<p><a  data-lightbox=\"post-image\" href=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-2.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-407135 aligncenter\" src=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-2.jpg\" alt=\"\" width=\"814\" height=\"457\" srcset=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-2.jpg 814w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-2-300x168.jpg 300w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-2-768x431.jpg 768w\" sizes=\"auto, (max-width: 814px) 100vw, 814px\" \/><\/a><\/p>\n<ul>\n<li>The rand weakened more than 9% in the days following the Moody\u2019s downgrade to a record R19.35 per dollar on 6 April, but has rebounded 13% since then;<\/li>\n<\/ul>\n<ul>\n<li>The cost of insuring South Africa\u2019s debt against default for five years using credit-default swaps more than doubled in March and April to a record, but fell back to a three-month low this week;<\/li>\n<\/ul>\n<ul>\n<li>The extra premium investors demand to hold the country\u2019s dollar bonds rather than US Treasuries has narrowed 296 basis points from a record high in March;<\/li>\n<\/ul>\n<ul>\n<li>After selling a record R64 billion ($3.8 billion) of South African government bonds on a net basis in the five months through May, foreign investors are buyers again. Inflows this month through June 10 stood at R6.9 billion, according to JSE Ltd. data;<\/li>\n<\/ul>\n<ul>\n<li>The National Treasury has attracted orders for more than twice the amount\u00a0<span id=\"f538bd54-abeb-11ea-b7c4-308d99722a50\">on offer<\/span>\u00a0at its weekly debt auctions, even after increasing sales by 34% last month.<\/li>\n<\/ul>\n<p><a  data-lightbox=\"post-image\" href=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-3.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-407137 aligncenter\" src=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-3.jpg\" alt=\"\" width=\"814\" height=\"502\" srcset=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-3.jpg 814w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-3-300x185.jpg 300w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2020\/06\/Junk-3-768x474.jpg 768w\" sizes=\"auto, (max-width: 814px) 100vw, 814px\" \/><\/a><\/p>\n<p>Bond yields have room to move lower as inflation slows due to low oil prices and the pandemic-induced decline in consumer demand, according to Societe Generale.<\/p>\n<p>Bond purchases by the central bank and the global search for yield should also support South African debt, the strategists said.<\/p>\n<hr \/>\n<p><strong>Read: <a href=\"https:\/\/businesstech.co.za\/news\/finance\/406485\/what-will-happen-in-south-africa-when-business-loans-dry-up-and-the-governments-grants-come-to-an-end\/\" target=\"_blank\" rel=\"noopener noreferrer\">What will happen in South Africa when business loans dry up and the government\u2019s grants come to an end?<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s as if South Africa\u2019s downgrade to junk never happened.<\/p>\n","protected":false},"author":59,"featured_media":222769,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-407131","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/407131","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=407131"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/407131\/revisions"}],"predecessor-version":[{"id":407139,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/407131\/revisions\/407139"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/222769"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=407131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=407131"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=407131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}