The rand may extend its best monthly rally since March 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 South African currency was little changed at R14,79/US$ by 12.37pm in Johannesburg, reversing an earlier decline of as much as 1,2% as the Competition Tribunal approved the £77bn (R1,5 trillion) beer deal with conditions. Foreign investors were net buyers of South African bonds for a ninth day on Wednesday, the longest streak since April last year.
“When the deal was first announced in October last year, we mentioned potential inflows of R225bn off the back of the deal, as around 15% 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 R6,3bn. 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% discount and lock-up terms, Peter Attard Montalto, senior emerging-markets strategist at Nomura, said in November.
If all South African residents, including state-run money manager the Public Investment Corp select the full-cash offer, there would be $5,3bn in inflows. If all resident and non-resident holders decide on the full-cash offer in rand, total flows would be $18,7bn, he said.
Foreign investors bought a net R1,8bn of South African bonds Wednesday. Yields on the benchmark government bond due in 2026 rose by two basis points to 8,79%, climbing for the first time in three days and bringing the decline this month to 59 basis points, the best performance since January.
Foreigners bought a net R2,4bn of stocks for a 19th day of inflows, the longest sequence of purchases since September 2009. The benchmark FTSE/JSE All Share Index advanced by 1,3% in a third day of gains.
The rand has strengthened by 5,8% against the dollar this month. The currency is up by 4,4% in the year to date, paring losses in the quarter to 0,1%. — (c) 2016 Bloomberg LP
