{"id":817832,"date":"2025-03-21T09:55:07","date_gmt":"2025-03-21T07:55:07","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=817832"},"modified":"2025-03-21T09:55:13","modified_gmt":"2025-03-21T07:55:13","slug":"south-africa-stands-to-lose-big","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/817832\/south-africa-stands-to-lose-big\/","title":{"rendered":"South Africa stands to lose big"},"content":{"rendered":"\n

The looming barrage of fresh US tariffs is leaving traders in emerging markets ready to bolt at the slightest whiff of risk.<\/p>\n\n\n\n

Levies set to land on April 2, combined with a deteriorating outlook for the US and signs of an economic renaissance in China and Europe, mean investors are preparing for new opportunities while guarding against surprise losses.<\/p>\n\n\n\n

Traders are getting increasingly anxious. Demand is rising for hedges to offset the risk of EM exchange rates weakening against the greenback, data suggest. <\/p>\n\n\n\n

The spread between three-month call and put options for the dollar against emerging-market currencies climbed to the highest since October 2023 this week, according to a JPMorgan index. A measure of EM credit risk is hovering near a four-month high.<\/p>\n\n\n\n

The ratcheting anxiety was on display in Jakarta, Bogota and Istanbul this week, as equities, currencies and bonds tanked when foreign investors rushed to the exits.<\/p>\n\n\n\n

\u201cThe moves may have been related to domestic issues, but the magnitude of the moves suggests investor caution particularly on emerging markets,\u201d said Prashant Newnaha, a senior rates strategist at TD Securities.<\/p>\n\n\n\n

\u201cOur sense is that investors will look to trim risk positions ahead of reciprocal tariffs coming into effect.\u201d<\/p>\n\n\n\n

At the heart of the intensified skittishness are questions over whether Donald Trump\u2019s import duties will stoke inflation and keep the dollar strong, or whether they\u2019ll push the world\u2019s largest economy into recession and drag others down with it. <\/p>\n\n\n\n

The extra yield investors demand to own emerging-market bonds versus US Treasuries hit a four-month high in March, Bloomberg-compiled data show.<\/p>\n\n\n\n

Further fanning the anxiety is the fact that the scope and targets of the levies aren\u2019t clear. Trump has dubbed his next announcement on tariffs \u201cthe big one,\u201d promising reciprocal levies based on those that other countries place on US goods, along with tariffs on autos, semiconductors and pharmaceuticals.<\/p>\n\n\n\n

But his administration hasn\u2019t specified who\u2019ll be targeted and at what rates.\u00a0<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

\u201cThat sheer uncertainty, even if only a fraction ultimately gets implemented, it\u2019s having an impact on the delivery of some of those \u2018animal spirits,\u2019\u201d said Manik Narain, head of emerging-market strategy at UBS in London. \u201cThere\u2019s a real lack of conviction in EM.\u201d <\/p>\n\n\n\n

And with Europe and China now offering alternative investment avenues to the US, the bar for exiting even the highest-yielding emerging-market assets \u2014 such as those denominated in Turkish lira \u2014 is now lower. <\/p>\n\n\n\n

For Indonesia, a big exporter of commodities to China, concerns about its fiscal health and the political longevity of well-respected Finance Minister Sri Mulyani Indrawati kindled a stock market rout this week.<\/p>\n\n\n\n

Then on Thursday, legislation\u00a0expanding<\/a>\u00a0the role of the armed forces was met with angry public demonstrations.\u00a0<\/p>\n\n\n\n

Fears about democratic backsliding<\/a> played a role in Turkey\u2019s recent market meltdown as well. Authorities detained longtime President Recep Tayyip Erdogan\u2019s top political rival on corruption charges on Wednesday, triggering a brutal selloff in stocks and the lira. <\/p>\n\n\n\n

While that rout was an idiosyncratic case exacerbated by a \u201csuper crowded\u201d trade and technical issues, the riskier backdrop has led to sharper moves, said Guillaume Tresca, global EM strategist at Generali Investments.<\/p>\n\n\n\n

\u201cThe uncertainty related to tariffs and higher volatility could have led fast-money accounts to close more rapidly their TRY trades,\u201d Tresca said. \u201cIt is a by-product of a more volatile and uncertain environment.\u201d<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

In Colombia, the\u00a0resignation of\u00a0<\/a>Finance Minister Diego Guevara after only three months in office stoked fears that the country was losing an advocate for fiscal responsibility. Bonds and the currency tumbled.<\/p>\n\n\n\n

And in South Africa, investors are rapidly cutting exposure to local debt as Trump aims his sights on the country, first halting aid and then expelling its ambassador to Washington, based on unfounded claims that South Africa\u2019s government is abetting the confiscation of land from White farmers.<\/p>\n\n\n\n

\u201cTrump\u2019s tariff discussions impact more than just trade, they significantly influence global capital flows,\u201d said Kristof Kruger, a fixed-income trader at Prescient Securities. \u201cWith increased market volatility, the rand and local bonds are vulnerable to sudden outflows.\u201d <\/p>\n\n\n\n

Few Havens<\/h2>\n\n\n\n

Tariff threats from the White House have also caused market dislocations in seemingly unaffected places. Poland\u2019s zloty, the most traded currency in Eastern Europe, suffered its steepest drop against the euro in three months on Feb. 3 after Trump slapped \u2014 and later paused \u2014 tariffs on Mexico and Canada. <\/p>\n\n\n\n

Even worse was a one-day selloff two weeks later that followed his mention of levies on cars, drugs and chips.\u00a0<\/p>\n\n\n\n

The Hungarian forint has showed a similarly volatile pattern in reaction to Trump\u2019s comments on trade policy, as well to his diplomatic efforts to secure a ceasefire in Ukraine.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

While Southeast Asia \u2014 along with India and frontier markets \u2014 have been touted as havens for traders navigating US trade policy, the routs this week highlight the power of spillover effects and that it\u2019s hard to single out where to hide. <\/p>\n\n\n\n

Johanna Chua, head of emerging-market economics at Citigroup Global Markets, warns that there\u2019s no clear end in sight.<\/p>\n\n\n\n

\u201cWe\u2019re still going to get more tariff noise after April 2,\u201d she said. \u201cThere\u2019s so much uncertainty.\u201d <\/p>\n","protected":false},"excerpt":{"rendered":"

The looming barrage of fresh US tariffs is leaving traders in emerging markets ready to bolt at the slightest whiff of risk.<\/p>\n","protected":false},"author":59,"featured_media":798708,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[10849,3580,3281],"class_list":["post-817832","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-donald-trump","tag-emerging-markets","tag-tariffs"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817832","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=817832"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817832\/revisions"}],"predecessor-version":[{"id":817837,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817832\/revisions\/817837"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/798708"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=817832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=817832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=817832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}