Local investors still pessimistic, says Investec Wealth and Investment
‘The big question from the local investor base is whether they should still have exposure to SA, given the uncertainty’
Investec's wealth business says South Africans continue to take their money offshore, as their pessimism about the country seems to outweigh global political developments that preoccupy investors in other regions.
While investors around the world are asking themselves if they should be cutting their exposure in markets such as the UK and US given uncertainty over Brexit and China-US trade war, Chris Holdsworth, chief investment strategist at Investec Wealth and Investment SA, said local investors were more concerned about stagnation in the SA economy and falling share prices that they did not even recognise signs of recovery.
“The big question from the local investor base is whether they should still have exposure to SA given the uncertainty there. The level of pessimism is extremely high.”
Holdsworth said growth in retail sales of 2.4% year on year in the second quarter of 2019, and a possibility of further interest-rate cuts if developed markets also reduce theirs, indicate signs of recovery, yet the company has not seen any signs among its SA clients that they want to repatriate their investments back into the country.
“There are signs of green shoots that are coming through, perhaps more slowly than we'd like, but the market is not giving them credit,” Holdsworth said.
Being a global player that has offices around the world and investments in both developed and emerging markets has helped Investec Wealth and Investment capture the a big share of those SA assets looking for a home abroad.
John Haynes, chair of the Global Investment Strategy Group, said the appeal for offshore investing was, however, not solely about escaping issues in SA.
The growing demand for offshore investment is everywhere, which benefits companies such as Investec, which has a strong foothold in both developed and emerging markets.
“In the UK too, investors used to think they could access the world through the FTSE index and it's the same thing that was driven to South Africans. It's not that they are losing confidence per se in their local geographies. It is just that global growth is accessible in a more diverse way now,” said Haynes.
Holdsworth said as much as local investors wanted exposure elsewhere, in his conversations with foreign investors, it appeared that many were also starting to “scratch and sniff” around SA, especially after the proposed acquisition of Pioneer Foods by PepsiCo. The local food producer announced in July that it has reached an agreement with global beverage giant which wanted to acquire all Pioneer Foods' outstanding shares at a premium.
“They are not necessarily deploying capital into our equity market. But if we start to show signs of growth, there will be demand for our equities,” Holdsworth said.
Haynes said Brexit uncertainty had not affected the wealth manager as it had some of other wealth and asset managers there.
For instance, former Old Mutual UK business, Quilter, reported in July that it only managed to attract £6bn in new business sales compared to £7.9bn in the first half of 2018, as investors continued to sit on their discretionary funds. Investec is yet to report its interim results for 2019, which will show to what extent it has managed to attract client inflows.
“Our clients are highly uncertain but they need us more now than in good times. We are getting more phone calls. We are not seeing outflows even on net term basis,” said Haynes.
Correction: August 28 2019
This story has been updated with the correct title for John Haynes.