Foreign investors have sold nearly R100-billion worth of South African equities in 2016 on a net basis, even as the country’s bond market attracted R62-billion from foreigners in the same period, according to JSE data.
While the SABMiller/Anheuser-Busch InBev (AB InBev) transaction accounted for the majority of outflows, SA’s economy had come under scrutiny as an emerging market investment destination, says Donna Nemer, head of capital markets at the JSE.
SA’s financial markets were also subject to external factors, including overall risk appetite for emerging markets, Nemer says.
“You just have to read the press to see that SA is not an attractive investment destination at the moment,” says Kokkie Kooyman, portfolio manager at Denker Capital.
“I think it’s simply that plus the fact that most index stocks in SA are fairly expensive,” he says.
Foreigners have been net sellers of local equities to the tune of R98,99-billion in 2016. SABMiller and AB InBev accounted for R43-billion and R21-billion of these sales, respectively.
The increase in the local share register of AB InBev was not enough to offset the outflow as a result of the delisting of SABMiller, Nemer says.
You just have to read the press to see that SA is not an attractive investment destination at the moment,
Kokkie Kooyman, portfolio manager at Denker Capital
“Overseas buyers can buy any other brewer, including AB InBev, on their own stock market. They don’t need to come here to buy it,” says Wayne McCurrie, portfolio manager at Ashburton Investments.
McCurrie says AB InBev was expensive, considering the short-term headwinds facing SABMiller in emerging markets. It had also sold some of its best brands to appease competition authorities, which had diminished its growth prospects.
Mining, media, mobile telecoms and banking were, respectively, the next largest contributors to equity market outflows on a sector basis, with Naspers posting net foreign sales of R12,9-billion, followed by British American Tobacco at R11,9-billion.
The country’s bond market, meanwhile, had attracted R62.2bn from foreign investors in 2016, compared with R13bn over the same period in 2015. With developed market bonds yielding low or even negative returns, investors have sought yield in emerging market debt.
Considering the large difference between developed market bond yields and South African bond yields, known as the carry, the rand would have to weaken greatly for foreign investors to be out of money, McCurrie says.
By Hanna Ziady for www.businesslive.co.za