Investors dumping South African shares and bonds

Foreigners have been dumping South African assets this year, with the JSE recording net outflows from stocks of R67 billion in 2023 and R123 billion outflows from its bond market. 

DFM Global CEO JC Louw revealed this in a social media post which outlined the net outflows from the JSE according to the exchange’s data and Bloomberg. 

Foreigners sold R4.6 billion of South African government bonds in July and R540 million of local stocks. 

Glenn Silverman, a strategist at investment consultant firm RisCura, told Business Day TV that one of the significant challenges facing the JSE is the recent legislative changes regarding the offshore exposure of pension funds. 

The National Treasury increased the pension fund offshore allowance to 45% from 35%, resulting in net outflows from the South African savings industry. 

This is despite local asset managers and investors believing local assets are undervalued due to poor investor sentiment, leading to foreigners selling local assets. 

Other emerging markets have also struggled to attract investment in 2023. However, South Africa has some factors, such as load-shedding and logistical inefficiencies, that have added to its risk premium. 

“Foreign investors have been substantial net sellers on the JSE for several years, and any reversal of this trend could add further momentum to the market,” Silverman said. 

In particular, “any improvements in the news cycle, whether economic, political, or global, could serve as a further catalyst for a market advance”.

Silverman said policymakers have several ways to stop money from leaving the country, including creating better policies to boost consumer, business, and investor confidence.

Such policies would help to achieve positive results, such as attracting and keeping skilled workers, stimulating economic growth, and reducing unemployment.

Reducing unemployment is vital as that would increase the savings of South Africans, which can be invested in the JSE. 

This will also help local asset managers, who typically charge higher fees and earn higher profits when managing money for individuals rather than institutions like pension funds.

As profit margins have shrunk at home, some asset managers, such as Ninety One, have turned to the Middle East to invest the trillions of rands they manage. 

Foreign investors have also continued to sell South African bonds, with outflows of R123 billion so far this year, according to JSE data.  If this trend continues, it will exceed the outflows of R155 billion in 2022.

Bonds
Purchases	R835.31 billion
Sales	R958.82 billion
Net (YTD)	-R123.5 billion

Stocks
Purchases	R473.39 billion
Sales	R540.67 billion
Net (YTD)	-R67.27 billion