SA bond dump; Stocks bullied, gold glitters; Credit Suisse sees SA light; Former Eskom execs want top job

By Linda van Tilburg

  • Investors have been dumping South African bonds at a rate of almost R2bn a day in August. With issuance increasing and a downgrade to junk looking a possibility, non-residents have sold a net R14.4bn of debt in the past two weeks. That is an average of R1.8bn a day. Foreign ownership of South African government debt fell to 37.9% at the end of July, the lowest level this year from a high of 42.8% in March 2018. Foreigners are exiting despite yields that are among the highest in emerging markets suggesting they are worried about a downgrade to junk by Moody’s. Bloomberg reports that inflows have turned into net outflows of R3.2bn for the year in August. In dollar terms, South African local currency bonds have underperformed all major emerging markets in August except Argentina’s. Moody’s will review its Baa3 debt rating for South Africa in November this year.
  • South African stocks approached a six months low yesterday. The JSE all-share index dropped by 2.11% while the benchmark Top-40 index was down 2.37%. This is after the US Treasury bond yield curve inverted for the first time since 2007 reflecting concerns for the US economy. The rand weakened to R15.40 cents to the dollar. Investors looking for safe haven assets boosted gold shares with Harmony Gold, Gold Fields and AngloGold shares rising by around 6%. Losers on the day were Kumba Iron Ore with a drop of more than 8%, Aspen Pharmacare fell by more than 6%, Exxaro and Sasol shares were down by more than 5%, while Naspers lost 3.96% of its share value. This is despite local retail sales data that rose 2.4% year-on-year in June.
  • Credit Suisse says stocks focused on the South African economy which have received a battering, have suffered enough. It suggested that investors should start accumulating these shares, funding it by booking profit on rand hedges that benefitted from weakness in the currency, while keeping South Africa at benchmark levels in the emerging market portfolio. There were reasons to be optimistic Credit Suisse analysts said; they expect some appreciation in the rand, sturdier household finances suggested consumer spending may recover, while the earnings outlook for domestic companies was improving. There was also evidence that heavy foreign selling of South African assets may almost be done.
  • So, who wants the toughest CEO job in South Africa, that of heading the beleaguered Eskom? According to Bloomberg there are a couple of former Eskom executives who are reported to be seeking the spot. They are Andy Calitz, former CEO of LNG Canada who started his career as an engineer at Eskom and Dan Marokane, a former Eskom head of group capital. Business leaders have also suggested that former CEOs Brian Dames and Jacob Maroga should be considered for the post. Eskom’s new leader will have to turn around a company that is saddled with R440bn debt. The acting CEO, who is also the board chairperson Jabu Mabuza will stay on until the end of October.
  • Facebook is being quizzed by the Irish watchdog which takes the lead in overseeing Facebook in the European Union after Facebook admitted that it paid contractors to transcribe clips of audio in the Messenger app from users of its services. It now says it will no longer continue the monitoring. Earlier Amazon and Apple have come under fire for collection audio snippets from consumer computing devices. It is not only EU regulators who have started digging deeper into privacy violations. Investigations are also under way in the United States.