SA bonds still in demand

Johannesburg - The South African stock market has nothing to be concerned about at a time that other debt markets are struggling to attract money.

Last week foreigners made net purchases of R1.97bn worth of bonds. Last year they took up almost R24bn worth.

The recent purchases came amid serious concern about the sovereign indebtedness of the so-called PIGS countries (Portugal, Italy, Greece and Spain), which has led to the flight of investments to emerging markets.

This is thanks to emerging markets' good balance sheets relative to those of their larger counterparts.

In the past the crises incolved the developing countries, but this time many of the emerging countries are well positioned to grow, reckons Atlantic Asset Management analyst Albert Botha.

One proof of this was seen on Tuesday during the auctioning of the R206 government bond for redemption in 2014. Demand was almost six times the issue of the R1bn bond with a 7.5% coupon.

This is not a recent development - it has been happening for some time, reckons Investec Asset Management portfolio manager Vivienne Taberer.

Foreigners' portfolios have long been underweight in South African bonds and Investec now sees this changing.

Another growth area is the issuing of corporate bonds. On Tuesday Transnet issued a statement saying that it wanted to sell $2bn worth of notes in the US and Europe to help with the diversification of its R30bn domestic debt programme.

These bonds can be sold on the London Stock Exchange without explicit government guarantees.

Some time ago analysts speculated that companies would increasingly look offshore to fund their infrastructure expansion plans. It is expected that government will have to issue more bonds to compensate for the budget deficit.

- Sake24.com

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