How Investors Move $1bn Out of SA Over Gordhan Fears

Pravin Gordhan,

Pravin Gordhan,

The turbulence in South African politics of the past week has led to a substantial outflow of foreign investor money, said the Institute of International Finance (IFF).

Scott Farnham, a research analyst at IFF, said the net portfolio outflows totalled $1bn from equity and bonds.

Money was withdrawn from all emerging markets, but Thailand and South Africa accounted for more than half of total outflows from the eight countries that are part of the IFF’s daily analysis.

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In the week from October 10 to 14 the net outflows from equity amounted to $475m and $531m from bonds.

The net figures reflect the difference between assets sold and purchased.

The National Prosecuting Agency (NPA) announced on Tuesday 11 October that it had summoned Finance Minister Pravin Gordhan to appear in court on charges of fraud.

The rand dropped sharply as a result.

Annabel Bishop, economist at Investec Bank, said the rand has recovered this week on positive market sentiment as the possibility of the prosecution of Gordhan was deemed to have waned somewhat.

On Monday foreigners purchased R1.8bn of South African bonds and equities on a net basis, according to her.

According to Farnham until the end of the third quarter equities had a nett outflow of $2.1bn from foreign investors, while there was a net inflow of $4.79bn into the debt market from foreign investors.

At this stage, 2016 has been the best year for foreign investors in respect of South African bonds since 2012, although it hasn’t reached the same levels yet.

In 2012, foreigners invested $12.41bn in South African debt.

There was a net inflow of $1.42bn in 2015.

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