Investors: ‘ride the storm’

2008-05-22 00:00

INVESTORS who are struggling to cope with volatility in the markets have been urged to “ride out the storm” until the cyclical downturn — which is expected to last for 12 to 18 months — has run its course.

This was one of the key messages to emerge out of a high-level Harvard House/Witness investment conference held in Pietermaritzburg yesterday.

“South Africa, 2010 and Beyond: Opportunities and Risks” was an initiative of Harvard House Group in association with The Witness and Weekend Witness.

Sanlam Glacier and Franklin Templeton also came aboard as co-sponsors of the event, which was the brainchild of midlands-based wealth management company Harvard House.

Arthur Kamp, research economist from Sanlam Investment Management, told The Witness that South Africa offers exciting investment opportunities in the medium to long-term.

He said the local market has the potential to deliver good returns within this timeframe.

“If you are already invested in the market, hold them [your investments] because they have already been so beaten down,” said Kamp.

He added that investors who are looking for returns in the short term during the downward cycle will no doubt be disappointed during the next 12 months.

He advised that investors follow three key principles in order to weather short-term cyclical storms:

• diversify across asset classes;

• do not try to time the market;

• apply a long-term horizon.

Michael Porter, Harvard House Group’s chief investment officer, noted that people should focus primarily on investments that produce income.

“If you rely solely on capital gains, then you can get burnt, as is the case now,” he said.

Porter added that investors who remain in the fray stand to gain once the dust has settled.

“You want to be there when the cycle turns [for the better]. Whatever you lose now will be more than recovered when the upswing begins,” said Porter.

The morning session was kicked off by outspoken political analyst Moeletsi Mbeki who warned that South Africa is not pursuing the correct economic policies: “Goldman Sachs has, I think rightly, predicted that 30 years from now South Africa will be nowhere near the dominant economic position it occupies in Africa today.

“The fastest growing sectors of the economy do not export and they absorb the least amount of labour. These are financial services, real estate, business services, construction, trade and transport and communications. The sectors that are the leading exporters and thus should absorb the most labour — manufacturing and mining — are in fact declining.”

The conference speaker list also included:

• Dr Mark Mobius of Franklin Templeton, known as the “emerging markets guru”.

• David Lewis, CEO of the Diversified Property Group.

• Murray Morrison, a top-rated technical analyst from JP Morgan.

kavith@witness.co.za

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