Banner Left
Banner Right

Pioneer concerned about SA

Pioneer concerned about SA

LONDON – European fund management firm Pioneer Investments said its holdings in South Africa, a large chunk of its emerging market portfolio, might prove vulnerable as the world’s central banks raise interest rates.

South African equities make up 10,3 per cent of Pioneer’s emerging market stock fund’s 933 million euros of assets. Brazilian stocks account for the largest share at 15,7 per cent, followed by Russian stocks at 13,7 per cent.With major central banks such as the Bank of Japan moving away from loose monetary policy, South Africa may face difficulties, John Pollen, Pioneer’s head of emerging markets, told journalists on Monday.”South Africa is more vulnerable (than some other developing nations) to global rate tightening …They have never had high foreign exchange reserves, and their savings rates are relatively low.”Last week, South Africa’s central bank urged consumers to avoid piling up debt and warned that it would act to curb future inflationary pressure, backing the case for more interest rate rises.The central bank has already hiked its repo rate by a full percentage point since June, and most analysts expect more increases before the end of the year.Pioneer’s Pollen said South Africa might also face political uncertainties, noting the possible bid for leadership of its ruling ANC party by former Deputy President Jacob Zuma.Zuma was fired by President Thabo Mbeki last year amid a corruption scandal but remains deputy president of the party and pulls strong support from left-wing backers, who see him as a viable candidate to replace Mbeki when he steps down in 2009.Rising global interest rates are proving to be one of the factors restraining growth in emerging market economies, Pollen said.”They are providing emerging market managers with a very strong headwind.There is always concern that central banks overdo (interest rate) tightening, and that is a risk in the case of Japan,” Pollen said.The Bank of Japan has already drained a considerable amount of liquidity from financial markets in recent months since abandoning its zero-rate policy in July this year.Pioneer is owned by Italian bank UniCredit.Nampa-ReutersBrazilian stocks account for the largest share at 15,7 per cent, followed by Russian stocks at 13,7 per cent.With major central banks such as the Bank of Japan moving away from loose monetary policy, South Africa may face difficulties, John Pollen, Pioneer’s head of emerging markets, told journalists on Monday.”South Africa is more vulnerable (than some other developing nations) to global rate tightening …They have never had high foreign exchange reserves, and their savings rates are relatively low.”Last week, South Africa’s central bank urged consumers to avoid piling up debt and warned that it would act to curb future inflationary pressure, backing the case for more interest rate rises.The central bank has already hiked its repo rate by a full percentage point since June, and most analysts expect more increases before the end of the year.Pioneer’s Pollen said South Africa might also face political uncertainties, noting the possible bid for leadership of its ruling ANC party by former Deputy President Jacob Zuma.Zuma was fired by President Thabo Mbeki last year amid a corruption scandal but remains deputy president of the party and pulls strong support from left-wing backers, who see him as a viable candidate to replace Mbeki when he steps down in 2009.Rising global interest rates are proving to be one of the factors restraining growth in emerging market economies, Pollen said.”They are providing emerging market managers with a very strong headwind.There is always concern that central banks overdo (interest rate) tightening, and that is a risk in the case of Japan,” Pollen said.The Bank of Japan has already drained a considerable amount of liquidity from financial markets in recent months since abandoning its zero-rate policy in July this year.Pioneer is owned by Italian bank UniCredit.Nampa-Reuters

Stay informed with The Namibian – your source for credible journalism. Get in-depth reporting and opinions for only N$85 a month. Invest in journalism, invest in democracy –
Subscribe Now!

Latest News