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The effect of changing interest rates on foreign investment The central bank has raised interest rates 4 times so far this year in an effort to counter inflationary pressures from the rands plunge last year. After the events of September 11 last year many investors became worried about their investments and elected to withdraw their savings and to rather invest in less riskier markets. This and the balance of payments deficit were probably the main the causes …

…appetite, which in turn supported emerging markets. This implies that local assets, which look inexpensive from an offshore investors perspective, are all the more attractive South African banks have fared poorly as falling interest rates hurt margins and the declining rand hurt investment activity, However, investors could see a reversal of sector fortunes this year if the rand is able to stabilize and reclaim a portion of its value, as most analysts expect it will.