How Can Investors Benefit from the Strong Rand?
A relatively strong rand presents investors with a good opportunity to externalize funds or to invest in local rand-hedge funds. But what are the offshore opportunities at present and should investors be taking the gap?
Russell Collister of Marriott International is optimistic about the next 3 years but slightly more cautious about the immediate future. “Since the start of the 3rd quarter, global markets have rallied in anticipation of a ‘U’ shaped economic recovery. Fears of a double dip recession have receded and both equities and corporate bonds are now generally reflecting expectations of a return to global growth’.
Collister expects that the next year will be positive for equity markets, but that investors will need to be more proactive in their portfolio management as markets become range bound. ‘The next critical phase for markets will be the final quarter of 2009 when companies begin to report third quarter earnings. Profits were flattered by one-off items in the second quarter and so comparisons may not be as favourable this time around. We expect to use any set back to increase our equity weightings as, longer term, we expect deflation to gradually give way to modest inflationary pressures in 2010 and 2011. This will positive for equities and property but negative for corporate bonds where we are beginning to lock in profits after an excellent period of gains.
This type of market environment is particularly suited to Marriott funds, with their income focus. ‘With the trauma of the credit crisis firmly behind us, income orientated investments continue to look attractive relative to cash and bonds, particularly government issues. Whereas income investors has typically been confined to a handful of sectors in the past, market declines have provided an opportunity to buy into a wider range of sectors without sacrificing yield.’
