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Johannesburg - The amount that South Africans are permitted to invest overseas has been increased at an opportune time for people wanting to supplement their foreign investments.
Last week in his medium-term budget framework Minister of Finance Pravin Gordhan raised the limit on the amount that individuals are permitted to invest offshore from R2m to R4m.
In reaction, portfolio managers reckoned this will not lead to a large outflow of funds, but that it is a good time to augment foreign investments because of the rand's current strength.
Tony Barrett, chief executive of BJM Wealth, said investors can now take advantage of exciting opportunities in countries where share prices are again starting to rise. "Until a week ago many investors could not use these opportunities because the full permissible amount had already been invested overseas."
Barrett advised investors to review their foreign portfolios and add to them if necessary.
Dave Mohr, chief investment strategist at Citadel, said it is unlikely that the larger foreign allowance will lead to a significant increase in foreign investment.
He said South Africans are wary of foreign investment because the rand has strengthened considerably in the past year and the exceptionally low interest rates overseas deter investors. In addition, the South African stock exchange has delivered much better returns than offshore markets over the past 10 years, and interest in foreign shares has consequently languished. Mohr said there are also no signs that local politics will cause investments to move overseas.
Neither does Peter Brooke, head of macro strategy at the Old Mutual Investment Group (Omigsa), expect a large outflow of money offshore.
"Very few people can invest R4m, and only the super-rich will make use of this opportunity."
Brooke said many who want exposure to foreign shares invest in offshore unit trusts for which the foreign investment allowance is not used.
Mohr also said the increase in the foreign investment allowance will not have a significant effect on the value of the rand.
He said the value of the rand will be determined rather by foreign financial conditions - as it has been in the past couple of days. "Greater uncertainty and weaker stock markets overseas are putting downward pressure on the rand because investors prefer the dollar under such circumstances."
Brooke said the Minister of Finance's message that the rand is too strong and hurting the economy is clear. Nevertheless he does not consider that the concession for individuals, allowing them to invest more offshore, will affect the value of the rand much.
He said the increase in the amount that companies may invest offshore, from R50m to R500m, is more likely to affect the rand's value.
- Sake24
For more business news in Afrikaans, visit Sake24.com.