SA portfolio inflows plummet in second quarter, data shows

Portfolio investments into the South African economy fell sharply in the second quarter, as investor risk-aversion towards emerging markets rises, Reserve Bank data showed on Tuesday.

Inward investment into South African bonds and equities shrank to R16.6bn from R89.4bn in the first three months of the year, the Bank said.

Appetite for bonds was hardest-hit, with non-resident investors cutting their purchases to a net R3.8bn in the second quarter from R46.9bn in the first quarter. Purchases of equities fell to R12.8 from R42.5bn.

The economy relies partly on volatile portfolio flows to fund its budget and current account deficits.

The Bank did not give a reason for the slump in investment into South African assets, but during the second quarter, global investors were scaling back their allocations towards emerging markets as worries about the health of the Turkish and Argentinian economies grew. This was followed by a steep sell-off in emerging-market assets in the third quarter, as investors fretted that economies such as SA could suffer from contagion from turmoil on Turkish and Argentinian financial markets.

Separately, plans by the ANC to speed up land redistribution has started to unnerve investors, despite assurances from the ruling party that land reform will follow a parliamentary process and the economy will  not be negatively impacted.

Reserve Bank data also showed on Tuesday that SA’s total external debt increased to R2.165-trillion at the end of the first quarter, from R2.130-trillion at the end of last year, mainly due to an increase in rand-denominated external debt.

On Friday, President Cyril Ramaphosa announced a multi-billion-dollar stimulus plan to pull SA out of recession.

Reuters