Investors return to SA as ETF short positions pruned

London - If anyone had doubts about the strength of the rebound in South African stocks, the latest data on exchange-traded funds should put them to rest.

Investors have cut their short positions in the largest ETF focused on the country to the lowest level since 2010, data from Markit show. That accompanied a surge in net capital inflows into 41 ETFs buying stocks in South Africa to a five-year high of R2bn in the first quarter, the data show.

The FTSE/JSE Africa All Share Index in Johannesburg has rallied 12% from a two-year low reached in January and the country has regained its position as the largest stock market in Africa and the Middle East.

The gains were driven by a rally in commodity prices and the Federal Reserve’s reiteration of a dovish monetary policy. Investors are defying a second cut this year in the International Monetary Fund’s projection for South African economic growth, rising borrowing costs, a slowdown in its biggest market China and political turmoil surrounding President Jacob Zuma.

“Investors are certainly coming back to South Africa,” said Simon Colvin, a London-based research analyst at Markit. “The story there is one of commodity rebound and the bottom you have seen in the rand.”

The short interest as a proportion of outstanding shares in the R6.6bn iShares MSCI South Africa ETF traded at 2.4% this week after falling as low as 0.9% on Friday. The fund has attracted net flows of R1.74bn this year, Colvin said.

The bullish sentiment is a turnaround from central bank figures that showed South Africans moved cash overseas for a 16th consecutive quarter in the final three months of 2015, the longest streak of quarterly outflows since the five years through September 1999.

Direct investments by South Africans abroad more than doubled in the fourth quarter to R37.4bn, the central bank figures, released March 8, show.

ZAR/USD
16.81
(-0.26)
ZAR/GBP
21.34
(-0.12)
ZAR/EUR
19.02
(-0.13)
ZAR/AUD
11.73
(-0.21)
ZAR/JPY
0.15
(+0.60)
Gold
1681.70
(+0.13)
Silver
17.39
(+0.17)
Platinum
815.55
(+0.35)
Brent Crude
41.90
(+5.78)
Palladium
1949.00
(+0.59)
All Share
54722.38
(+2.85)
Top 40
50199.80
(+2.79)
Financial 15
11467.53
(+4.66)
Industrial 25
74264.52
(+2.52)
Resource 10
49969.31
(+2.29)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
19% - 229 votes
I am taking a hit, but should be able to recover in the next year
25% - 300 votes
My finances have been devastated
29% - 345 votes
It's still too early to know what the full effect will be
26% - 303 votes
Vote