Hence, when non-residents eventually reduce their bond holdings, these net sales will be more easily absorbed by domestic investors, and the domestic market for securities will remain liquid. Appropriate, sophisticated market tools to hedge against currency and interest rate risk can only help in the deepening of domestic markets. These tools I have just mentioned deal more specifically with currency- and capital flow-related risks.
Nonetheless, the list is not exhaustive. Resilience also depends on the way in which investors perceive the institutional and governance quality of the recipient country, the existence of checks and balances, and the depth and quality of its political debate. And, as South Africa’s experience shows, financial resilience also depends on real economic resilience.