IIF Portfolio Tracker data show a positive correlation of 56 per cent in the current year, and indeed since 2010, between net non-resident flows into South Africa and into emerging markets as a whole. Non-residents became net sellers of South African bonds and equities in the last three months, coinciding with an underperformance of the domestic bond market and renewed rand weakness.
We have noted that for emerging markets as a whole, there seems to be an increased correlation between the performance of local-currency bonds and the exchange rate. This observation also applies of late to South Africa, providing further evidence of the linkages between bond flows and currency trends.