Investors Favor South African Bonds Over Equities Despite Rally

AFRICAN STOCKS AND FINANCEDecember 9, 2024 at 8:57 AM UTC

TLDR

Foreign investors have bought a net 25.8 billion rand ($1.4 billion) in South African government bonds this year.
On the contrary, they have sold 127 billion rand in equities, according to Johannesburg Stock Exchange data.
This marks the ninth consecutive year of foreign outflows from the equity market.

Foreign investors have bought a net 25.8 billion rand ($1.4 billion) in South African government bonds this year, while selling 127 billion rand in equities, according to Johannesburg Stock Exchange data.

This marks the ninth consecutive year of foreign outflows from the equity market, even as the FTSE JSE Africa All Share Index rallied 20% in dollar terms since mid-June, outperforming the MSCI Emerging Markets Index's 5.4% gain.

Investors are drawn to the relative safety of bonds, with local-currency government debt yielding a 19% return since mid-June, significantly above the 4.1% emerging-market average. UBS Asset Management attributes this to slowing inflation and promising economic growth prospects, forecasting a 2.1% GDP rise in 2025.

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Key Takeaways

South African bonds appeal to investors seeking lower-risk returns amid global uncertainty. While equities benefit from local political stability, external risks such as U.S. tariffs, China's economic slowdown, and a widening current account deficit could pressure the rand and equity valuations. Bonds provide a more predictable return in an uncertain economic environment.

Finance

South Africa

Stocks

Bonds

JSE

Economy

Equities

Fixed Income