There is no silver bullet on where to invest in an environment where the rand is plumbing new depths, economists and analysts said on Monday.
Vunani Group economist Johan Rossouw said there were a myriad factors apart from the rand’s value to consider before investing, but if one took a view that the currency was indeed weak, and would not depreciate further in future, then, for instance, one would invest in domestic facing stocks, as these companies will benefit from a stronger rand in the future.
“The problem with investing based on the value of a currency is how long is a piece of string, it may well weaken further tomorrow and it may not … one shouldn’t try to time the market when it comes to investing,” he said.
He said some general principles were to always invest with a long-term perspective in mind; have a well-diversified portfolio, because then at least some investments in the portfolio will benefit from a weak rand; don’t act or divest when investments are at levels of distress and divest when it suits the investor, not when the investor feels forced to sell.
Each individual had their own investment horizons and targets, he said.
Old Mutual economist Johan Els said from a long term investment perspective the weak rand was “just noise” and would strengthen over time as it had done in the past.
He said, however, that if an investor “has crossed all their T’s and dotted their I’s with a financial advisor”, they would also do well to consider his view that there was likely to be a much better economic growth environment in South Africa in two to three years with, for instance, the risks of load shedding much lower by that time, and the rand’s volatility also expected to diminish over that period.
Citadel Global director Bianca Botes said in a research note on Monday that a number of currencies around the world had slipped to fresh multi-year lows against the greenback yesterday morning, as global investors continue to seek the safety of the dollar amid uncertainty and rising interest rates.
“The rand is under pressure, breaching the R18/$ mark, as volatility continues,” she said. By mid-afternoon the rand had depreciated a substantial 2.8% to R18.05 per dollar.
BUSINESS REPORT