Offshore markets ‘key for investors’
The offshore markets may be key in bringing better growth to clients in South Africa
Following a tough few years for investments, the offshore markets may be key in bringing better growth to clients in South Africa.
This was the advice offered to Nelson Mandela Bay investment brokers by Allan Gray product development head Earl van Zyl at an Allan Gray investors roadshow at the Boardwalk Hotel yesterday.
Van Zyl emphasised the importance of diversifying clients’ investments to ensure better returns in a tough economic climate.
“We’ve had a tough first quarter, with returns [at their] worst since 2008,” he said.
“The last four years have been very tough and returns could be lower over the next few years, but it is still within the normal range at the moment.
“There is more demand for offshore investments [now], and there is value in mixing investment profiles.
“People focus quickly on the level of the rand, and when it weakens they move funds offshore, but while the rand is a factor, we don’t believe it’s the most important factor [in making these decisions].”
Equity analyst Tim Acker said many South African companies had chosen to branch out on a global level in recent years, with mixed success.“Woolworths spent about R20-billion buying David Jones in Australia,” Acker said.“Property companies are also investing outside South Africa.”
While there were many challenges facing companies within South Africa, Acker did not believe e-commerce would be a threat to retailers soon.
“E-commerce accounts for about 15% of sales in the United States, but only about 1% here, and if retailers implement a click-and-collect system like in the United Kingdom [where consumers buy online and collect products in-store], the malls will be fine,” he said.
The greater challenges will lie in addressing the fiscal deficit and resolving Eskom’s problems, Acker said.
“Eskom’s revenue has gone up fivefold [since 2005] but the sales have stayed the same – meaning the prices have gone up fivefold – and the debt has increased tenfold. There are still real problems to solve there.
“Another risk for investors is that the South African market is quite concentrated – with about 55% of shares belonging to the top 10 companies. [This risk can be] mitigated through balancing [portfolios] with offshore investments.”
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