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The SA Daily 28 November 2019

Foreign net selling peaks

Shireen Darmalingam

  • Foreign net selling of SA equities and bonds for 2019 year to date totals R300bn, the most in the past decade. Equity outflows total R225bn and bond outflows R72bn thus far this year. In 2018, total outflows were R127bn, comprising equity outflows of R59bn and bond outflows of R68bn.
  • In response, the rand has shed 2.3% thus far in 2019, after already having lost 13.9% in 2018. The rand has had to face global trade uncertainty, Eskom’s dire finances, and poor business confidence. In addition, there have been unemployment’s recently heating up to a highest level in 11 years in Q3:19 as well as the October MTBPS stark deterioration in the SA fiscal outlook.
  • The rand also now faces a potential ratings downgrade in 2020 after both S&P and Moody’s changed SA’s sovereign outlook from stable to negative earlier this month.
  • We nevertheless see the rand as already discounting the various economic weaknesses cited by both the rating agencies and IMF (the poor fiscus, the inefficient SOEs, the ever-present threat of power cuts, high unemployment, and lack of real progress with policy reform).
  • The rand is currently at R14.76/$, and we forecast it at R14.85/$ by year-end and R14.80/$ by end-2020 — because we expect restorative policy action next year as well as a somewhat firmer global economy. 

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