September 20 2011 - by Business Report, I-Net Bridge
A rising concern among South African investors is the growing tension between the members of the eurozone, many of whom are major trading partners, says David Green, chief investment officer at PPS Investments.
The indebtedness of Greece, Ireland, Spain, Portugal and Italy, and their attendant solvency and liquidity problems have highlighted the fragility of the common monetary alliance, Green said.
Economic challenges in the US, and rising inflation and interest rates in China were also a concern for South African investors, Green said.
“Given the parlous state of the above-mentioned economies, it's perhaps unsurprising that the rand has remained relatively strong against the currencies of our trading partners,” Green said.
Green said that it was more important to focus on the valuations available in the various major asset classes from time to time, rather than in forecasts for the future of their associated economies as there was “absolutely nothing unusual” about the current volatility in markets.
On this simple but robust basis, the most attractive asset classes continue to be global developed and emerging market equities, in the aggregate, he said.
“There are, of course, pockets of greater or lesser value within these broad categories. South African equities are significantly cheaper now than for the last year-and-a-half.
And cash and bonds (both local and international) and local listed property are still the more expensive asset classes,” Green suggested.
“In investing, the longer your time horizon, the more certain you can be about the eventual outcome.
So, having a longer-term and valuation-based view of the investment environment gives confidence in the merits of this approach.”