in this market by south african and non - south african borrowers from non - south african investors, is now almost r202 billion. a part of these loan issues is usually hedged by investing in south african bonds. 4. globalisation and monetary policy the reintegration of south africa into the world economy and the liberalisation of financial markets also have important implications for monetary policy. as bill mcdonough, president of the federal reserve bank, pointed out in 1998 : “ the technology for processing information and making this information widely available has fundamentally altered the way the world channels saving into investment. no longer does the global economy rely primarily on loans from commercial banks to meet its financing and investment needs. rather, more than even before, the global economy of today looks to funds from the fixed - income and related capital markets to intermediate its credit needs. because the global capital markets have become so important in the credit intermediation process, the economic well - being of us all depends on the orderly flow of funds in these markets. the flow of these funds, in turn, increasingly relies on price signals generated by trading activity that takes place daily in these markets. the reliance on secondary market trading for price discovery constitutes the fundamental difference between funds from securities markets and loans from banks ”. this change in the way that savings are channelled to investments has resulted in greater volatility in international capital movements. recent non - resident transactions on our bond exchange are a clear reflection of this greater volatility in international capital flows. in such a situation, it is more important than ever before to create and maintain a sound environment for foreign investment in a country. this makes it more imperative for monetary policy to pursue clearly stated objectives. increasingly throughout the world, central banks are pursuing price stability as their basic policy focus. where countries have high rates of inflation which are out of line with the rest of the world, disruptive capital flows could occur because of fears of currency misalignments. the closer integration of the world economy has therefore focused the ultimate objective of monetary policy and made it even more important to attain this objective. it should, however, also be realised that such a policy stance does not provide unconditional protection against speculative capital outflows. external economic shocks or perceived poor policy measures can still trigger a reversal in capital movements. monetary policy cannot prevent these reversals. international investors make their decisions on the basis of a wide variety of developments, including price stability. the best approach that central

part of the proceeds from such issues for financing the expansion of their activities in the rest of the world. south african institutional investors, such as insurers and pension funds, were allowed to exchange part of their rand - denominated portfolios for foreign - currency denominated assets through swap transactions entered into with foreign counterparts. in accordance with the principle of relaxing exchange controls, permission was granted in june 1995 to south african institutional investors ( long - term insurers, pension funds and unit trusts ) to exchange, through approved asset swap transactions, part of their south african portfolio for foreign securities. in march 1997 it was announced that institutions that qualified for asset swaps would be broadened to include regulated fund managers registered with the financial services board. with effect from july 1997, portfolio managers registered with the financial services board as well as stockbroking firms which are members of either the johannesburg stock exchange, the bond exchange of south africa or the south african futures exchange, could also apply to acquire foreign portfolio investments by way of asset swaps. integration into the world financial markets required a major restructuring of the institutional arrangements in the south african capital markets. the johannesburg stock exchange ( jse ) introduced changes to provide for corporate ownership, foreign ownership of stockbrokerage firms, dual capacity trading, negotiated commissions, and electronic screen trading. the jse is continuing to improve its facilities by providing for the immobilisation and dematerialisation of shares, and for improved clearing and settlement arrangements. the total value of shares traded on the jse increased from r63 billion in 1995 to r448 billion in 1999. the most spectacular increase in volumes over the past few years took place in the bond exchange of south africa. total turnover in this market increased from r2 trillion in 1995 to r8, 8 trillion in 1999. the relaxation of south african exchange controls made an important contribution to the development of the bond exchange and transactions by non - residents in this market have increased significantly. the adjustments that have occurred in the south african economy, and on south african monetary policies during the past few years, were necessary and timely. these adjustments were needed to restore and maintain overall economic equilibrium. south africa has increasingly developed robust financial, economic and foreign exchange markets. this latter market is growing rapidly and its daily average turnover now exceeds $ 9 billion. another interesting development following the globalisation process is the emergence of a euro - rand market. the outstanding nominal amount of rand - denominated loans raised