For those following local politics and economics, the last quarter has been somewhat of a “colourful” time for our rainbow nation. Now, if there’s one thing that the market hates, its uncertainty and we had bucket loads of it. It is therefore no surprise that we were suitably punished in the wake of Finance Minister Nene’s sudden departure and all the subsequent revelations surrounding the Gupta’s alleged puppeteering hands in cabinet restructuring.
The one question on the lips of so many investors at the time was: Should I be going offshore?
Now don’t get me wrong, having exposure to assets outside our borders is an essential component to any investment portfolio and one that, if rightfully included, should have bolstered your portfolios over the 2015 period. With that said, however, any investment decision driven by emotion (fear being the strongest) is likely to do more damage than good. And fear was undoubtedly wildly at play.
Thankfully, sanity prevailed and with Treasury back under the steady hand of Minister Gordhan, the Constitutional Court ruling on Nkandla as well as the cumulative response to the likes of Gupta run Oakbay Resources by Corporate South Africa, our markets have not only settled but rebounded.
From its lowest point at the end of January to 15th April, the market has gained an impressive 15.27%. At the same time the currency has regained some favour and broken the R14.50/$ rate (from a low of R16.78/$) and is testing the R20/£ level. Foreign investors are queuing up to take advantage of the current bond rally, having already purchased R25.6bn of the nation’s bonds so far in 2016. This represents the best start to a year since 2010 and a turnaround from the final quarter of 2015, when they dumped R1.5bn of debt.
So with so much “bad news” plaguing our daily news feed, this renewed stability (however fragile) is a welcome change and should at least provide investors some relief. For those who were considering investing more offshore in the wake of the chaos, your patience has been rewarded and, if anything, the opportunity to expand your investment horizon has become more attractive with the strengthening rand. Where and how is always the tricky part and one to hopefully cover in the coming weeks.