It is clear that the South African domestic securitisation market is on an upward march, doubling annually over the last four years and predicted to grow significantly in 2006. The market, not surprisingly, is dominated by banks and property companies issuing residential mortgage-backed securities and commercial mortgage-backed securities, most of which is investment grade, creating a risk-friendly environment. The pricing is good and returns sound. However, this positive market sentiment is, to some extent, hindering growth and the development of cross-border issuances.
There are at least two important impediments to market growth through cross-border issuances. The first is South African exchange control rules – which inhibit the use of South African assets in an international context. However, it is understood these rules will loosen up, given recent comments by the Reserve Bank Governor. The second is the fact that many of the larger investors in South Africa have no real need for the types of investment the international capital markets would bring.
