Business Maverick: Foreigners Are Dumping South African Bonds as Junk Status Looms

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Business Maverick: Foreigners Are Dumping South African Bonds as Junk Status Looms By Bloomberg

With issuance increasing and a downgrade to junk a looming possibility, non residents have sold a net 14.4 billion rand of the debt in August so far, according to JSE Ltd. data compiled by Bloomberg. That’s an average of 1.8 billion rand 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.

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.

 

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