Exchange control relaxation in 2015 opens door to portfolio diversification, says Standard Bank Group

Aug 06, 2015

The relaxation of exchange controls announced in the 2015 Budget offers investors the opportunity to internationalise their asset bases and limit the risk of having all their eggs in a highly localised portfolio.

However, taking that first step can be formidable for the general investor who has never traded offshore before.

“South African investors have far fewer hindrances to investing offshore than they did in the past. But taking that first step is the hardest,” says Fatima Essop Mohamed, Business Manager Webtrader, Global Markets at Standard Bank Group.

From April 1 this year, the foreign capital allowance to freely invest abroad is set at R10 million a calendar year from R4 million before. The allowance for families lifts to R20 million and should be accessed once the annual single discretionary allowance of R1 million has been exhausted for purposes abroad.

“A world of investment opportunity is truly opening for South African investors. However, a serious amount of demythologising is required. We as South African investors have a responsibility to improve our understanding of the risks and opportunities that exist in offshore markets.” says Ms. Essop Mohamed.

One of the major challenges for any investors trading only in South Africa is the weak rand, which hit 14 year lows at the end of July 2015.

“It is daunting taking the risk of going offshore, before you even start investing the perception of currency conversion losses weighs heavily on Rand based investors.  Key to note is that the same rationale doesn’t impact us in our consumer spending of international brands. Instead of just being a consumer (in rands) of all those foreign goods, why not be an investor benefiting from the sale of the same products? As South Africans we are exposed to so many of these products already. We are actually well placed to know about the best companies to invest in,” says Ms Essop Mohamed.

“You can access the top 100 companies in the world via the US exchange, by either taking a conservative approach in Exchange Traded Funds or investing in the individual stocks directly. Even the tech behemoths like China based Tencent are available for trading on the US exchange.”

The global stage provides opportunities for all types of investors, from traders to long-term investors.

Standard Bank’s newly launched research offering available on Standard Bank Webtrader provides research content and stock screening from Factset, making it easier for investors to navigate the vast opportunities that exist in markets much bigger than the Johannesburg Stock Exchange (JSE).

South Africans qualify for a 15% relief at source on dividend withholding tax when trading US markets due to a double taxation agreement between South Africa and the US (it would be 30% without this agreement).

Standard Bank Webtrader offers face to face sessions as well as webinars to assist South African Investors in getting the hang of offshore investing or trading, with teams available until New York Close time to assist with trading and education. 

Ms Essop Mohamed cautions that it is advisable to trade from US$10 000 upward to avoid trading costs eating away at the profits. “That shouldn’t deter investors from growing their dollar reserves in the interim.”

Standard Bank’s Webtrader offering has been specifically designed to help investors to diversify their portfolios and lift their skill levels. It is an online trading platform that gives users the opportunity to trade internationally across 19 countries and 29 exchanges and CFDs in those same markets and Spot FX.

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