South African markets show confidence
PA Johannesburg South Africa's abolition of foreign exchange controls for non-resident , investors had only a slight effect on financial markets in Johannesburg yesterday. Although trading was at times confused after the surprise weekend announcement by the Finance Minister (Mr Owen Horwood) share prices showed only modest falls, while interest rates rose slightly on the money markets. Mr Horwood's move, effective today, scrapped the twotier foreign exchange system set up after the bloody 1961 Sharpeville riots provoked a massive withdrawal of capital by overseas investors. Until last week non-resi-dents had to trade shares and other assets through the financial rand, worth about 77 U.S. cents or some 17 per cent less than the commercial rand's value of 93 cents. The two-tiered system attracted foreign 'investors, who purchased shares at the lower rate while receiving
dividends at the higher rate. This was a premium the South African Government paid foreigners for taking the political risk of investing here. With the new unitary rate set today al around 88 U.S. cents, foreigners had a golden opportunity to make windfall profits by taking their money abroad. But traders said there were few signs money was leaving the country, a view confirmed by foreign exchange dealers who reported a very quiet day's trading. Share prices were marked down about 10 per cent at the opening, in line with the new exchange rates, but recovered later as speculators snapped up what they saw as bargains. Traders said that among positive aspects of the move, gold mines now’ would receive more money for each bar of gold exported, with the Rand down in value against the U.S. dollar. Ecomomists were generally delighted with the news, which they had not expected until later this year.
They believed that once foreign investors had time to adjust, they would feel more confident about investing here with the ability to withdraw their money from a large pool of foreign exchange if they wished. The only note of caution was that' further political unrest could scare foreign investors,, but economists said this was a risk the Government was apparently prepared to take.
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Press, 9 February 1983, Page 28
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355South African markets show confidence Press, 9 February 1983, Page 28
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