In the Days Before the Elections, Foreigners Dumped Billions in South African Bonds, But They Are Piling Back

International investors dumped billions in South African government bonds in the run up to the elections according to the JSE numbers. In the four trading days before Wednesday, international investors sold South African government bonds of R4.2 billion.

However, they started to pile back in straight after the elections even though there are fears of a global trade war. 

The first day back of trading after the elections showed that R372 million in local bonds went to net buyers. 

On the Friday after the election, increased gains showed that international buying probably accelerated. There was a gain of a percent on Friday to 8.45% for the government ten year R186 bond.

Forecasts proved to be correct as the election results increased the demand for bonds and could be said to be more positive than investors thought.

Local government bonds that have decent yields compared to other markets are being seen as valuable by international investors according to Edgar Mafoko the portfolio manager at FNB Wealth and Investments. The rand was also in a better spot on Friday as it was trading at R14.19 to the dollar.

However, due to a standoff between the US and China, the post-election gains were followed by a sharp slump in the global markets. 

Large losses occurred in the market ahead of the US governments decision to increase tariffs from 10% to 25% on $200 billion of Chinese goods on Friday. However, markets turned higher on Friday after US President Donald Trump received a letter from the Chinese President Xi Jinping that asked for the two countries to cooperate on a trade deal.  

According to Mafoko, the post election relief may take a few months to be seen. Also, the rand and bonds may start to run even harder if the trade tensions are resolved. 

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