The second quarter of 2023 saw non-South African residents make net purchases of JSE-listed bonds amounting to R22.1 billion. <\/p>\n\n\n\n
However, this trend reversed in the third quarter, with net sales totalling R4.9 billion. October and November then witnessed a turnaround as net purchases surged to R23.8 billion. <\/p>\n\n\n\n
Therefore, cumulative net bond purchases for the first 11 months of 2023 stood at only R14.9 billion, compared to net sales of R4.6 billion in 2022.<\/p>\n\n\n\n
The SARB said several factors contributed to these fluctuations, with concerns about persistent inflation and the potential for central banks to maintain higher interest rates for longer playing a pivotal role. <\/p>\n\n\n\n
Consequently, the share of non-resident holdings in domestic government bonds dropped from an all-time high of 42.8% in March 2018 to 25.4% in October 2023<\/strong>.<\/p>\n\n\n\n This trend of capital flight continued in the JSE-listed shares market, with non-residents offloading R43.2 billion in the third quarter of 2023, marking the sixth consecutive quarter of net selling. <\/p>\n\n\n\n This negative sentiment extended into October and November, resulting in cumulative net sales of a staggering R117 billion for the first 11 months of 2023, significantly surpassing the R67.4 billion recorded in the same period in 2022.<\/p>\n\n\n\n The share of non-residents\u2019 holdings in total listed shares witnessed a notable decline, dropping from a high of 40% in March 2023 to 29.8% in November. <\/p>\n\n\n\n The SARB said the prolonged sell-off was driven by concerns over the escalating Middle East conflict, poor domestic and global economic growth, and the impact of load-shedding in South Africa.<\/p>\n\n\n\n Investment inflows and outflows have a significant impact<\/a> on the South African economy.<\/p>\n\n\n\n A research paper<\/a> from economists in the SARB\u2019s Economic Research Department revealed the effect of net investment outflows on the South African economy.<\/p>\n\n\n\n In the paper, SARB economists explained a strong link between investment and economic growth, with South Africa being particularly reliant on foreign investment to make up for the country\u2019s poor savings rate.<\/p>\n\n\n\n The Reserve Bank said in its Monetary Policy Review that South Africa experienced significant outflows from foreign investors in the first half of 2023.<\/p>\n\n\n\n The SARB attributed the significant outflows to local structural economic issues and geopolitical tensions of the country\u2019s own making.<\/p>\n\n\n\n South Africa\u2019s largest asset manager, the Public Investment Corporation (PIC), has also flagged its concern<\/a> about foreigners dumping local assets.<\/p>\n\n\n\n The PIC said geopolitical tensions have made investors risk-averse, leading them to sell emerging market assets, such as South African stocks and bonds.<\/p>\n\n\n\n This has caused capital to flow out of emerging markets and into safer assets, such as US dollar-denominated assets.<\/p>\n\n\n\n This article was originally published by Daily Investor – read the original here.<\/strong><\/a><\/em><\/p>\n\n\n\n
\n\n\n\nShare of non-resident holdings of domestic government bonds<\/h2>\n\n\n\n
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\n\n\n\nCumulative non-resident flows in domestic equity and bond markets<\/h2>\n\n\n\n
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