Equity and bond flows, the rand and the Top40
ZAR, TOP40 and Foreign Buying/Selling of SA Equities and Bonds
For many this will be intuitive, but as a bit of background – I have put the net buying (value> 0) and selling (value< 0) of SA bonds (SABO) and SA equities (SAEQ) – flows – on a single x-axis with the stock of buying/selling since the start of 2013, the USDZAR exchange rate and the TOP40 Index, to illustrate the effect of foreign flows on the rand exchange rate and Top40 performance.
It is worth noting that despite the notable depreciation in the rand seen over recent weeks, the stock (accumulated since the start of 2013) of foreign funds in SA remains high, when compared to the previous rand blowout in early 2014. Should these funds flow out in the manner that was seen in Jan/Feb 2014, the rand could weaken further, from already weak levels. Additionally, the recent sell-off on the JSE appears to have been precipitated by a selling of equities by foreigners, as we saw the first major net-selling of equities by foreigners in a number of months.