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The rand was left battered when former finance minister Pravin Gordhan was called back from the UK by the presidency and then fired – an event that was followed by ratings downgrades from Standard & Poor's and Fitch.
Since the initial shock investors have adjusted their views on the outcomes of ‘junk status’ and what it really means for the country. Instead of all foreign investors of SA debt scrambling for the exit, they seem to be taking a more measured approach while waiting to see what the political landscape may bring in the run-up to the ANC’s Electoral Conference in December.
However, investors have warned that should Jacob Zuma stay in office, or if Nkosazana Dlamini-Zuma succeeds him as president, this will trigger more volatility.
The figures
Citi Bank’s World Government Bond Index (WGBI) is a global benchmark, with $3tr of investable cash, and represents around $10bn dollars or 22% of the total foreign holdings of South African debt. To put that into perspective: that’s almost $2bn more than SA’s entire construction industry’s contribution to GDP.
The benchmark 10-year government bond yield strengthened from 8.825 to 8.625 last week, while the rand was almost 2% stronger for the same period. In the last two weeks the rand recovered some 6%.
Further, despite the recent downgrades, Moody’s announced at the end of March that it would release a re-rating within the next 90 days, signalling that it will be taking time to analyse the South African economy after the change in finance ministers.
Important economic announcements and data to look out for this week include:
Monday
- SA: Consumer Confidence
- EU: German IFO Business Climate
Tuesday
- US: CB Consumer Confidence and Home Sales
Wednesday
- SA PPI
Thursday
- Japan: Bank of Japan policy decision
- EU: European Central Bank policy decision
- US: Unemployment Claims
Friday
- SA: Private Sector Credit, M3 Money Supply and Balance of Trade
- Great Britain: Preliminary GDP
- US: Advance GDP
