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Foreign exodus has barely budged the rand

‘The rand’s resilience against other peer currencies proves confidence in Ramaphosa’s ability to implement change.’

As foreign investors dumped South African bonds and equities in the past two weeks at a rate last seen in 2016, the rand didn’t seem to notice.

South Africa depends on portfolio flows to finance a persistent current-account deficit, and with more than 50% of domestic fixed-rate debt in the hands of foreign investors, any reversal should put pressure on the rand – or so the argument goes. But as outflows mounted, reaching R27 billion in the 10 days through Wednesday, the currency gained 1.2% against the dollar.

The last time South Africa saw a similar scale of outflows in a two-week period, in October 2016, the rand weakened 5%. What’s different this time? The political outlook under new President Cyril Ramaphosa, suggests Henrik Gullberg, the London-based executive director of emerging-market trading strategy at Nomura International.

It’s “somewhat strange” that the rand would strengthen “and would suggest there must be some other inflows not captured in the daily bond and equity flows data,” Gullberg said. “That, and the rand’s relative resilience over the past few weeks compared with peer currencies, would suggest there is still belief in the ability of Ramaphosa to implement change, albeit very gradually.”

The rand’s gain in the midst of an emerging-market selloff sparked by rising US rates and a strengthening dollar shows there is more to the rand than portfolio flows, said Alvin Chawasema, a fixed-income trader at Sasfin in Johannesburg. Slowing inflation and a favourable interest-rate differential with developing nations also supported the currency, he said.

Source: Bloomberg

© 2018 Bloomberg

 

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What is the influence of the REIPPP project that is back on track? The 27 projects that were signed off recently will bring in R56 billion in a short period of time. Minister Radebe expects foreign investments of $25 billion in green energy in coming years. I will appreciate it if someone with knowledge of the relative value of outflows and inflows can give an opinion on this.

Albert Einstein famously said:
“Compound interest is the eighth wonder of the world”
Funds all over the world are continuously chase yield – and mostly find it in emerging markets, like sunny SA.
Nomura’s quote “It’s “somewhat strange” that the rand would strengthen “and would suggest there must be some other inflows not captured in the daily bond and equity flows data’’, just confirms the mentality of certain investors/funds, over time.
Haha – this is what I have been saying for years…there are lots of other flows (carry trades etc), that are done daily that provides liquidity …I have never seen a compilation of these flows in the so-called official data/figures, hence the so-called ‘’somewhat strange’’ discoveries!
Fund managers like (Allan Gray, Coronation, PSG, Nedgroup Investments, Prudential, Absa, Old Mutual, Investment Solutions, Oasis Crescent, Investec, Standard etc) with their 25 % offshore investment hysteria and frenzies – methinks lost their clients (and sadly a lot of people close to retirement), a lot of money on the exchange rate repatriation – market-to-market, for their clients.
The ZAR, she is going nowhere in the next 12-18 months….it’s staying right here – in sunny volatile gangster’s paradise, methinks!

Ask me I know:

Nature abhors an imbalance. The evil antimatter to the miracle of compound interest is compound fees

What retirement advisors don’t tell you is that the miracle of compound interest is later undone by the miracle of compound inflation!

Yes, Cyril is the man!
He has stardust in his backside and the stars bow down to him.
We will see !

Cyril has a Zuma in his backside and butterflies in his stomach , a couple of skeletons in his closet , and a vice -president he cant trust to put out a fire in Mahikeng , had to rush back ……tells me something about a divided ANC , worst of all tribalism just peeking out amongst the rubble

On point, and then we have Trevor Manuel asking why Zuma got away with it for so long. The majority of SA and the ANC don’t yet understand the difference between democracy and the tribal, autocratic King uShaka type rule practiced by Zuma and his Lieutenants! Freedom they cry, Free…dom it must be said, if they are not able to change their thinking!!

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