South Africa said to be ready as offshore investment in it slows : LUSENET : TimeBomb 2000 (Y2000) : One Thread



CAPE TOWN October 22 1999 Sapa-INet-Bridge

South African financial markets, and in- deed most emerging markets worldwide, would be affected by jit- ters surrounding the Y2K issue rather than actual technological problems stemming from the millennium bug, according to Gensec Asset Management. South African markets had already started to experience a slowdown in offshore investment related to Y2K, as investors become more risk averse as the end of the year ap- proaches.

Speaking at a press briefing, Gensec's IT analyst Neil Margo- lis said: "A decreasing number of market commentators now believe that Y2K-related problems could cause a full-blown economic re- cession in 2000. However, investors are becoming more risk averse as 2000 approaches. This is causing a temporary drying up of cap- ital flows to emerging markets. The effect is a Y2K-induced flight to quality, with capital likely to be attracted to "safe- havens" as we near year-end." Regarding the problems and risks associated with the switchover to 2000, he said misconceptions and perceived problems about the millennium bug could end up causing more disruptions to organizations and economies than actual Y2K-induced IT systems failures.

He said the South African bond markets had already experi- enced a slowdown in offshore investment over the past few weeks as a result of Y2K. This was expected to continue until the be- ginning of 2000, with relative market weakness also putting some downward pressure on the rand versus the dollar.

Margolis also revealed that a global poll of fund managers had forecast increased consumer spending relating to Y2K readi- ness as they stockpiled goods in the last weeks of 1999, boosting economic activity. However, the first few weeks of 2000 would likely see a sharp fall in demand as people drew down these stocks, dampening the economy.

Even though South Africa was well positioned going into 2000, the country was unlikely to escape unscathed, as it tended to get bundled together with other emerging markets.

"In actual fact, South Africa is well ready for the switchover, and because of our third-world status we are possibly not as reliant on technology as first-world countries, which could further be to our advantage. For example, the mining and resources sector, which continues to play a significant role in the economy, is considered to be a low-risk sector due to its lesser dependence on information and communication technology.

The public sector has also been making solid progress in compli- ance lately." Margolis said that the US-based IT research company the Gart- ner Group had rated South Africa among the top 17 most prepared countries in the world. The World Bank had also rated the country favorably, as one well aware of compliance and readiness issues.

In fact, he pointed out, the upgrades in IT systems forced on most companies for Y2K would be beneficial for them in the longer-term. "Many companies have used the Y2K challenge as an opportunity to upgrade or replace systems altogether, employing the newest available technology. This will create a widespread increase in efficiencies."


-- Watching (the@mar.kets), October 26, 1999



Same scenario for U.S. stocks,

The closer we get..............well you know!

Sell,Sell,Sell,!!!! just not yet Oct.27th

First week of Nov. should be interesting as should the rest of this year.


-- D.B. (, October 27, 1999.

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