“Portfolio outflows have increased lately as a response to growing domestic and global forces, which prompted the South African Reserve Bank (SARB) to raise rates last month [the repo rate is at 6%]. We don’t see any bottom for South Africa just yet and expect the South African Rand (ZAR) to continue its fall in the months to come … The recent rate hike given falling core inflation and benign export performance could limit the fall in value of the rand in the next few months, but the path of least resistance is still down. The country still needs to adjust significantly in a context of growing volatility in the emerging market space,” according to a note by Pavilion strategists posted by Demitra DeFotis of Barron’s.
Earlier this year, South Africa, a major metals producer, saw its trade deficit widen to about 4.5% of GDP after a wave of strikes damaged the mining industry and sharp fall in exports. With the current accoutn of balance of payments still under pressure, some observers argue that South Africa is more vulnerable to capital outflows, BusinessDay reports.
iShares MSCI South Africa ETF
