Fitch: South African Bond Market Compares Well to Emerging Market Peers
Fitch Ratings-London/Johannesburg-05 October 2009: Fitch Ratings says that, as a leading emerging market, the South African bond market is well-developed due to strong liquidity relative to other emerging markets; stable and supportive macroeconomic and fiscal policies; a healthy banking sector; and an advanced regulatory framework.
Steady growth in the nominal value of listed bonds since 2003 from ZAR505bn to an expected ZAR827bn in 2009 - supported by a reasonably diverse investor base that includes pension funds, asset managers, insurance companies and international investors - has improved both the depth and tightness of the local bond market over the last five years. Fitch, however, believes there is scope for further improvement in market participation.
"The South African bond market has been supported by government and state owned enterprise issuance over the last 12 months, and it is expected that this will continue in the short- to medium-term as planned government infrastructure spending via the SOEs could exceed ZAR600bn over the next five years," says Roelof Steenekamp, Associate Director in Fitch's South African Corporate team.
Given the current lack of liquidity in international markets, Fitch believes that the SOEs (most notably Eskom, Airports Company South Africa (ACSA), Transnet and TCTA) will have to raise the bulk of the required funding on the domestic market, primarily through bond issuance. Investor appetite for this level of issuance is however uncertain at this point, and would depend on further market development and a real recovery in the South African economy, which is not expected until late 2010; and as such, corporate issuers are likely to remain under pressure in the medium term.
The report, entitled "South African Bond Market Overview" is available on www.fitchratings.com.
Contact: Roelof Steenekamp, Johannesburg, Tel: +27 11 380 0903. Karabo Matentji, Tel: +27 11 380 0910.
Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.
Additional information is available at www.fitchratings.com.
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