Local risks put extra burden on struggling rand and bonds
Emerging-market assets have been taking strain since the beginning of August, but local risk factors have singled out SA for even harsher punishment
SA’s risk premium widened at a faster rate since the beginning of August than the emerging-market average, suggesting local risks are exacting an added cost amid a broad sell-off of developing-nation assets. The premium investors demand to hold SA debt rather than US Treasuries, known as the sovereign spread, has climbed 63 basis points since the beginning of August to 336, the highest level since November 2016, according to JPMorgan Chase & Co indexes. The emerging-market premium increased 43 basis points in the same period. A cocktail of negative economic news, political risks and falling commodity prices accelerated a slide in the rand and bonds sparked by crises in Turkey and Argentina and escalating trade tensions between the US and China. President Cyril Ramaphosa’s announcement on August 1 that the ruling party backed an amendment to the constitution to seize land without compensation has weighed on the currency, along with worries over rules governing mining. "Emerging-marke...
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