Investing offshore simplified through new online trading offering

From 1 August, Sanlam iTrade - the online share trading platform from Sanlam Private Investments - will offer asset swap capabilities which will make it easier for South Africans to invest offshore without using up their foreign allowance. iTrade is one of the first platforms in the country to offer asset swaps and its launch comes at an opportune time for investors to look offshore for opportunities.

According to Gerhard Lampen, head of Sanlam iTrade, asset swaps are essentially an exchange of assets between two parties. “The swaps give investors access to equities, bonds or exchange-traded funds anywhere in the world.” Investors cannot make use of derivatives through asset swaps, as set out by the Reserve Bank.

Industry statistics show that domestic fund managers now have more than a 23 percent offshore weighting. That is up from under 14 percent in 2007. South African fund managers are allowed 25 percent offshore exposure. “We introduced the offering in answer to increased demand from clients. Because of the ease of using asset swaps, it is ideal for those who have used up their full foreign allowance but would still like to increase their offshore exposure. And also for those who may still be in the process of getting their tax clearance to invest offshore.”

He says, “Now is an opportune time to look offshore, especially given the strong rand. If the rand weakens dramatically, it would be good to have offshore diversification. There are also some signs that the country’s lawmakers are moving to a more closed economy, as seen in the decision to appeal Walmart’s SA investment. That will affect foreign direct investment, and could at some stage turn the tide against the rand. Many global stocks are also trading at very cheap valuations compared to the last decade making investment in them regardless of an exchange rate bonus.”

Through Sanlam iTrade’s new capabilities, traders can position their portfolio to benefit from other strong currencies, such as the Australian dollar. “If you’re worried that the American dollar will weaken because of low real interest rates and higher inflation, then investing in Aussie-dollar assets may be an option. If the rand weakens against the Aussie dollar, then investors will benefit from an extra return on investment.”

Lampen says valuations for overseas companies are low when compared to South Africa. As a result, investors now have access to good quality multinationals at low price-to-earnings ratios, yet offering decent dividend yields of three percent or higher. “Investors should stick to those companies with good balance sheets. And many of the major firms offer that.” He cites Coca-Cola and Procter & Gamble as examples of multinationals.

The asset swap facility follows the launch, a year ago, of access to 24 global stock exchanges on its link with Saxo Bank and their award-winning platform – including the New York Stock Exchange and London Stock Exchange. The launch also included access to foreign exchange markets, derivatives and direct commodities. Lampen says it has enjoyed strong demand since its launch. The London Stock Exchange has proven most popular because it falls in our time zone, but for some young traders it was exciting to access the US markets after work... Investors have also opted for major companies such as Coca-Cola, Microsoft and Berkshire Hathaway.

Sanlam iTrade is partnered with European bank, Saxo Bank’s platform to access global markets. Investors can access the asset swop capability via an iTrade account which has rands deposit into it. Sanlam iTrade will then convert that into the investor’s chosen currency.