If the Rand remains weak, returns in foreign currency could boost investment portfolios

Eric Enslin _FNB Private Wealth

The gloomy economic start to 2016 has not dispelled the forecast of a tough outlook for South Africa over the course of this year.

Fresh from the festive season, South Africans came back to a vulnerable currency and volatile local equity markets. Meanwhile, the International Monetary Fund (IMF) says it expects SA’s GDP to grow at just 0.7% this year – this is slightly higher than the 0.5% forecast by FNB Economists.
Lack of rain, rising interest rates and proposed double-digit electricity hikes further point to a trend of disposable income coming under immense pressure.

Eric Enslin, CEO of FNB Private Wealth and RMB Private Bank says the combination of a tough economy and rising cost of living will no doubt suppress consumer spending, limit potential investment by companies, and subdue investment returns. He says investment strategies will be immensely tested over the course of this year.

“Many investors would have seen the worrying economic trend towards the end of last year and possibly planned for 2016 accordingly. However, some may have delayed decisions on where to put their money, retaining the optimism that comes with a new year.

“In the short-term, it is abundantly clear that returns from companies that only have operations in South Africa will be hard to come by. But there might be opportunities in companies which have offshore operations.”

Enslin says the notion of going offshore sounds a lot more difficult than it really is – pointing out that there are easier ways to gain offshore exposure. “The most basic way to get offshore exposure is to buy shares in companies whose profits are largely generated outside of our borders, and try to diversify across sectors to cushion against industry volatility.

“Such shares tend to cost slightly higher than most but the performance of those companies is likely to be better than those limited to South Africa. Significantly, if the Rand remains weak, returns in foreign currency will provide a boost.”

Enslin does caution that when looking offshore, investors need to be realistic about their expectations due to slower than usual growth in global economies. This follows the International Monetary Fund’s (IMF) forecast that Global GDP growth is expected to rise to about of 3.4% this year – slightly lower the previous forecast of 3.6% but way higher than local (SA) growth expectations.



Latest


16 Feb 2021
Transition management services partnership announced

Standard Bank has signed a memorandum of understanding (MoU) with Chicago-headquartered financial services company Northern Trust, to partner on the…

Transition management services partnership announced

Standard Bank has signed a memorandum of understanding (MoU) with Chicago-headquartered financial services company Northern Trust, to partner on the delivery of transition management services across Southern Africa. Under the partnership, Standard Bank’s clients will gain access to Northern Trust’s full suite of transition management services. Transition Management is a…

16 Feb 2021
Tax free wealth creation with property funds

By Liliane Barnard, CEO and Portfolio Manager at Metope Investment Managers, and Aimee Glisson, Director: Operations, Performance & Risk at…

Tax free wealth creation with property funds

By Liliane Barnard, CEO and Portfolio Manager at Metope Investment Managers, and Aimee Glisson, Director: Operations, Performance & Risk at Metope Investment Managers The tax year, along with the deadline for an investor’s maximum R36 000 annual tax-free savings account contribution, comes to an end on the 28 February 2021. Investors…

16 Feb 2021
Why multi-manager investing is popular

Multi-management has been around for over two decades. This investment management approach is popular among many investors because it promises…

Why multi-manager investing is popular

Multi-management has been around for over two decades. This investment management approach is popular among many investors because it promises to deliver smoother, more consistent investment returns, despite cyclical turbulence of financial markets. Given last year’s drastic swings in financial markets and continued uncertainty on how the Covid pandemic will…

16 Feb 2021
Momentum Health Solutions unpacks COVID-19 vaccine roll-out plan

Momentum Health Solutions announced its COVID-19 vaccine roll-out strategy and how it intends to support both its members, as well…

Momentum Health Solutions unpacks COVID-19 vaccine roll-out plan

Momentum Health Solutions announced its COVID-19 vaccine roll-out strategy and how it intends to support both its members, as well as the uncovered population, in being vaccinated. As the COVID-19 virus continues to spread, a third wave is imminent, should the vaccination rollout not commence soon. Speaking at a recent…


Top stories


10 Sep 2020
How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key…

How too much choice is draining your brain

By: Paul Nixon, head of technical marketing and behavioural finance at Momentum Investments From the words of Francis Scott Key that dubbed America “The land of the free”, which stuck, to the unforgettable Mel Gibson monologue where an army of painted Scots were willing to trade their lives for the…

13 Apr 2020
Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19…

Investors should keep a reasonable investment allocation outside of SA

MoneyMarketing asked Roland Gräbe, the head of Tailored Fund Portfolios at Old Mutual Wealth, about offshore investments in the COVID-19 environment and what form a global market recovery will take.

13 Apr 2020
SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The…

SA’s Proposed Covid-19 Disaster Management Tax Relief

The National Treasury recently issued the draft Disaster Management Tax Relief Bill (Bill) for public comment by 15 April. The draft Bill, together with its explanatory memorandum, provides clarity with regards the tax relief measures President Cyril Ramaphosa announced on 23 March.

10 Apr 2020
When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved…

When the going gets tough, farmers are on familiar territory

South African farmers are old hands at adapting to uncertain and daunting circumstances, and our local agricultural industry has proved to be most enterprising in acclimatising to challenges as they arise.


Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za