Johannesburg - The rand may extend a two-day rally after South Africa’s approval of Anheuser-Busch InBev’s takeover of SABMiller was seen triggering foreign-exchange inflows and as international investors continue to buy government debt.
The rand strengthened 0.3 percent to 14.7362 to the dollar by 11:33 a.m. in Johannesburg, reversing an earlier decline of as much as 1.2 percent, as the Competition Tribunal approved the 77 billion-pound ($104 billion) beer deal with conditions. Foreign investors were net buyers of South African bonds for a ninth day Wednesday, the longest winning streak since April last year.
“When the deal was first announced in October last year, we mentioned potential inflows of 225 billion rand ($15 billion) off the back of the deal, as around 15 percent of SABMiller shareholders are local investors,” Informa Global Markets Senior Emerging Markets Analyst Christopher Shiells said in a note from London.
“But this could also be as small as 6.3 billion rand. The exact amount depends on who accepts cash offers vs cash for stock offer and how many passive foreign investors decide to reinvest in the JSE.”
Most investors will probably opt for the full cash offer, as the partial share choice carries a 5 percent discount and lock-up terms, Peter Attard Montalto, senior emerging-markets strategist at Nomura, said in November.
Read also: Trib okays SABMiller takeover
If all South African residents, including state-run money manager the Public Investment Corporation select the full-cash offer there would be $5.3 billion in inflows. If all resident and non-resident holders decide on the full-cash offer in rand, total flows would be $18.7 billion, he said.
Foreign investors bought a net R1.8 billion of South African bonds Wednesday. Yields on the benchmark government bond due 2026 rose 2 basis points to 8.79 percent, climbing for the first time in three days. Foreigners bought a net R2.4 billion of stocks for a 19th day of inflows, the longest sequence of purchases since September 2009. The benchmark FTSE/JSE All Share Index advanced 1.2 percent.
BLOOMBERG