Foreigners choose local bonds over equities
Foreigners were once again net sellers of local equities during July, with a net outflow of R6.1 billion during the month taking the year to date outflow to R10.8 billion. It’s a far cry from the inflow of R64.2 billion in 2007 and the record R71.7 billion in 2006. And with pressure on all emerging equity markets, the decline in foreign investment on the JSE is a trend that looks set to continue, at least during the current quarter.
Barbara Price-Hughes, Equity Analyst and Fund Manager at BoE Private Clients notes that the first quarter of 2008 was the worst on record for foreign investment on the JSE, with a net outflow of R11 billion – exceeding the previous record of R8.8 billion set in the third quarter of 2002. While the second quarter saw positive inflows, the current quarter is once more showing net outflows amounting to R6.6 billion to date.
“Its nothing personal - July’s selling was across most developed and emerging equity markets with EMEA Equity fund redemptions amounting to $1.7bn in July and Brazil experiencing outflows of $10bn over the last two months,” says Price-Hughes.
“On the positive side there has been an inflow into local bonds with a record R40 billion net purchased during the second quarter and already R7 billion in the current quarter. It is not possible to predict future flows but the foreign investment trend away from equities and into bonds could continue while the currency remains steady after its steep sell off earlier this year,” she concludes.
