Choose wisely to score offshore

Johannesburg - While emerging markets remain a popular investment destination for South African asset managers, canny investors will harvest the best returns.

Many local asset managers have punted offshore investments as the destination for smart money in 2010, and have begun to expand their product ranges to accommodate this.

Francois van der Merwe, portfolio manager at Novare Investments, said these markets have generally attracted higher investment inflows than those of developed countries. This is because record low interest rates - for instance in the US and European Union - have prompted backers to search for better returns elsewhere.

He advised investors who venture offshore to consider more asset classes than just equities and bonds by adding currencies and commodities to their portfolios.

More Dubais could be coming

Using Australia as an example, he pointed out that the Australian dollar's fortunes are closely linked to those of the gold price as demand for the currency improves when investors buy gold shares listed there.

In a situation like this, those who punt on rising gold prices will reap a double reward if they have invested in both gold shares and the local currency.

Still, US research group Bank Credit Analyst (BCA) has warned emerging market equities are in most instances overpriced.

"There will likely be more volatility in emerging markets in 2010," it said. It also voiced concerned about high levels of government debt and sovereign bond exposure.

BCA cautioned there are likely to be more trouble spots in coming weeks - with problems similar to those of Dubai - and markets like Venezuela and Hungary are to be avoided.

- Fin24.com