ASISA: Tough regulations a blessing in disguise for South Africa's financial sector

Tough regulation of South Africa’s financial services sector combined with ongoing exchange controls is helping South Africa weather the current global financial markets crisis.

Leon Campher (pictured), CEO of the new Association of Savings and Investment South Africa (ASISA), says while South Africa is certainly feeling the heat generated by the turmoil that the financial world currently finds itself in, the country’s economic fundamentals remain intact and are supported by a robust financial services sector.

“There has been no evidence suggesting that any of our banks or financial institutions may have to be bailed out as has been the case in the US and Europe. All parts of our financial services sector are well regulated and we have not seen evidence of undue stress in any of the sectors.”

Campher acknowledges that pain is nevertheless felt by many investors who have seen the value of their investments decline in recent weeks, in some instances quite significantly.

But he also reminds investors that this is not the first bout of volatility that markets have suffered and that this will also not be the last.

Campher recalls a couple of occasions when world markets tumbled significantly, the most memorable being Black Monday, the biggest one day stock market crash in history on 19 October 1987, when the Dow Jones shed 22.3% or US$500-billion off its value in a single day. This caused stock markets around the world to follow suit, including South Africa.

He says since then central banks around the world have had to step in on several occasions to rescue their financial markets.

“Times of extreme volatility do not dissipate the need for savings and investment. They do, however, highlight the need for solid financial planning.”

Campher adds that investors who are invested in line with a well constructed long-term financial plan have much less to worry about than consumers who have poured all their money into their neighbour’s favourite stock of the day.

“If your investment portfolio is well diversified and if you have a long-term view the currently volatility should not cause you sleepless nights. And if you are worried, this is not the time for panic driven decisions. If you quit equities now, you materialize what have been paper losses until now.”

Campher says equities haven proven over time that they will eventually always outperform all other asset classes. Therefore, he says, investors should think twice before cashing in on their investments, including their pension money, while equities are down.

He says investors who have come to realize that their investment strategies may have been misguided should consult a qualified financial adviser before making any decisions. Often, he says, all is not as bad as it seems once put into perspective by an expert.