South African assets have turned from market darlings to duds. The rand, bonds and stocks had a flying start to the year, benefiting as a relative haven among emerging markets and from a rise in commodity prices spurred by Russia’s invasion of Ukraine.
But sentiment has soured.
The nation’s assets have gone into retreat as investors assess rising global interest rates, after hikes from the Federal Reserve and the Bank of England this week.
Concerns are also growing over inflation, as well as the surging Covid-19 cases in China, and what restrictions imposed by Beijing to fight the virus may mean for the world economy.
The rand is on track for a third week of declines, the longest losing streak since November last year. Its 8.5% decline over the past month – pushing it beyond the psychological level of R16/dollar – makes the currency the worst performing in emerging markets.
But some analysts, including those at Societe Generale and Anchor Capital, believe the losses have gone too far.
Nolan Wapenaar, co-chief investment officer at Anchor Capital said:
And South Africa’s rand debt has not fared much better.
Non-residents were set to be net sellers of the nation’s government securities for the first week since March. By Thursday, foreigners had sold R8.6 billion of bonds, based on settled trades data from the JSE. Local-currency-denominated government debt headed for a sixth consecutive week of losses, its worst run in eight months.
Stocks have felt investors’ aversion to risk more sharply than their emerging-market peers, sliding towards the worst weekly slump since October 2020.
Johannesburg’s benchmark FTSE/JSE Africa All Share Index deepened this week’s sell-off beyond 6%, a steeper retreat than MSCI’s index of developing country stocks, which is down about 4%.
More than 90% of the benchmark equity gauge’s members were lower on Friday, helping to make it one of the three worst-performers globally this week in US dollar terms among more than 90 major indices. – Bloomberg