SA capital flows increased in Q3

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File photo: Filomena Scalise

Pretoria‚ Dec 6 (I-Net Bridge) - South Africa managed to attract what the Reserve Bank has referred to as a sizeable amount of inward foreign direct and other investment capital in the third quarter. The bank released its December quarterly bulletin on Thursday.

SA recorded net capital inflows on the financial account of the balance of payments to the value of R56.8bn in the third quarter following an inflow of R48bn the quarter before.

Inflows into the financial account are particularly important for SA at this stage‚ as it helps finance the large shortfalls on the current account.

The Reserve Bank said SA benefited along with other emerging market economies as these markets still offer investors higher returns when compared to advanced economies.

Interest rates are higher in emerging market economies when compared to their developed counterparts.

Inward direct investment into SA increased further by R22.2bn in the third quarter following a R6.6bn increase in the second quarter‚ as foreign investors increased their equity stake in existing direct investment entities.

“.. these flows also reflected loans granted by foreign parent companies to their South African subsidiaries‚” the bulletin said.

The bank noted that the resilience of emerging market economies in the midst of heightened risk in global financial markets has been evident in persistent flows of capital into these markets.

Foreign portfolio investment into SA increased by R27.5bn in the third quarter following an increase of R22.7bn.

While investors continued to substitute listed equity investments for domestically issued debt securities‚ the issuance of an international bond by a state-owned enterprise confirmed investors' interest in the country's bond market‚ the bulletin noted.

“The recent downgrade of South Africa's sovereign ratings is‚ however‚ likely to affect investor sentiments towards the country adversely‚” the bulletin said.

-I-Net Bridge