Recovery and Growth of the South African Debt Capital Markets

Speaking at the IMN Capital Markets Summit in Cape Town, Florian von Hartig, Standard Bank Group’s Global Head of Debt Capital Markets, said that despite the volatility of the markets, Standard Bank Group believes that the overall trend is towards stabilisation.

Government intervention in the global financial market made during 2008 and 2009 to address the global credit crisis was not unprecedented, but was extraordinary. Standard Bank Group believes the effects of the stabilisation programmes instituted globally will make itself felt by the end of 2011.

Mr von Hartig, said: “The credit crunch resulted in investors fundamentally shifting their view of emerging markets from purely opportunistic investments to more strategic investment portfolios. Standard Bank believes that growing institutional investor demand for emerging markets debt is a structural shift in the international capital markets. Foreign purchases of local bonds have been net positive to the extent of R70bn for the year to date. This is a phenomenal figure in the context of the South Africa local market.”

Non-government issuances exceeded R80bn for the year to date. The R100m mark is likely to be exceeded soon as we expect the evolution and development of the South African market to continue. Already this year the market has seen strong growth in Floating Rate Note and CPI instruments as well as the gradual migration of risk appetite down the credit curve.

“This strategic shift has seen local issuers assessing the offshore market. Standard Bank has seen the South African Sovereign and several investment grade issuers such as Naspers, Goldfields and Mondi venture into the global capital markets, with public sector issuers like Transnet and Eskom likely to follow.

“We expect the trend to persist through 2011 with the large state owned enterprises cementing offshore Debt Capital Market funding as a core source of funding in the medium term.”

Standard Bank Group predicts that offshore interest in emerging markets, and especially interest in Africa will increase in the next three to five years. As markets become more at ease about the strength of the global economic recovery, the low interest rate environment will drive investors towards higher yielding emerging market assets providing a good backdrop for emerging market debt issuance.

Speaking at the IMN Capital Markets Summit in Cape Town, Florian von Hartig, Standard Bank Group’s Global Head of Debt Capital Markets, said that despite the volatility of the markets, Standard Bank Group believes that the overall trend is towards stabilisation.

Government intervention in the global financial market made during 2008 and 2009 to address the global credit crisis was not unprecedented, but was extraordinary. Standard Bank Group believes the effects of the stabilisation programmes instituted globally will make itself felt by the end of 2011.

Mr von Hartig, said: “The credit crunch resulted in investors fundamentally shifting their view of emerging markets from purely opportunistic investments to more strategic investment portfolios. Standard Bank believes that growing institutional investor demand for emerging markets debt is a structural shift in the international capital markets. Foreign purchases of local bonds have been net positive to the extent of R70bn for the year to date. This is a phenomenal figure in the context of the South Africa local market.”

Non-government issuances exceeded R80bn for the year to date. The R100m mark is likely to be exceeded soon as we expect the evolution and development of the South African market to continue. Already this year the market has seen strong growth in Floating Rate Note and CPI instruments as well as the gradual migration of risk appetite down the credit curve.

“This strategic shift has seen local issuers assessing the offshore market. Standard Bank has seen the South African Sovereign and several investment grade issuers such as Naspers, Goldfields and Mondi venture into the global capital markets, with public sector issuers like Transnet and Eskom likely to follow.

“We expect the trend to persist through 2011 with the large state owned enterprises cementing offshore Debt Capital Market funding as a core source of funding in the medium term.”

Standard Bank Group predicts that offshore interest in emerging markets, and especially interest in Africa will increase in the next three to five years. As markets become more at ease about the strength of the global economic recovery, the low interest rate environment will drive investors towards higher yielding emerging market assets providing a good backdrop for emerging market debt issuance.