Weak Growth: South African Stocks Dip as Foreign Investors Cashout

• Weak Growth: South African Stocks Dip as Foreign Investors Cashout

Foreign investors are selling their holding of South African stocks despite being the cheapest among emerging-market peers.

Foreign investors have been selling South African equities for 12 straight days through Wednesday, the longest of such move in six months.

So far this year, foreign investors have sold a net 25.4 billion rand or US$1.8 billion, the largest capital outflow since Bloomberg started compiling data for JSE Ltd in 1999.

The stock market, however, rebounded slightly on Thursday after MTN Group (constitute one-third of the entire market) announced its financial results for 2018 and plans to dispose of assets and raised $1.1 billion to support its balance sheet.

Its stock rose by 18 per cent as investors favour the decision and are optimistic the shares would gain traction now that the issue with regulators in Nigeria have been resolved.

Still, experts doubt the rebound can be sustained in near-term, especially with fixed investment falling and the economy slowing from 2.6 per cent growth rate in 2017 to 1.4 per cent in 2018.

Stagnant economic growth amid electricity supply issue is chasing potential investors from Africa’s largest equity market with a market capitalization of $473 billion.

But South Africa’s weak growth and uncertainty about its future projects are weighing on foreign direct investment as foreign investors are looking for major policy changes.

“Chronic economic growth underperformance has exerted a drag on the JSE,” said Jana van Deventer, a Johannesburg-based economist at ETM Analytics.

“The fact that foreigners are rotating out of the stock market suggests that the international investor community is not convinced that the growth-enhancing reforms introduced thus far will suffice to kick start the domestic economy.”