The Compelling Story Of Investing Offshore

Investing your money beyond your home country’s borders offers portfolio diversification and – if executed correctly – potentially higher returns than a portfolio with little offshore exposure. But investing offshore should never simply be done for the sake of it, as the potential opportunities also come with risks.

- Amanda Visser

The global economic growth outlook for the year is far from rosy, with real prospects of it slowing to below 3%, meaning we are heading for a global recession. According to the World Bank, growth is expected to slow from the revised 3% for 2018 to 2.9% in 2019.

International trade and manufacturing activity has softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures.

Neil Shearing, group chief economist at Capital Economics, says that while growth of below 3% may not sound like a big deal, one has to be mindful of the earlier statement by the International Monetary Fund (IMF) according to which a figure below 3% constitutes a global recession.

There is little reason for optimism since many of the causes of this downward growth trajectory remain firmly in place – Britain is still without an exit from the EU, trade tensions between the US and China remain, and country-specific issues are starting to emerge across the globe.

Economic growth of below 3% would be a “worse outcome” than most analysts currently anticipate. It is likely to produce a combination of weaker stock markets, lower bond yields and renewed easing by the world’s major central banks, says Shearing.

Over the last decade investors have become accustomed to achieving higher-than-average returns with a lower level of volatility.

Radhesen Naidoo, business analyst at Allan Gray, says that while 2018 was a disappointing year for global stock markets overall, with the MSCI World Index down about 9%, the S&P 500 down 4% and MSCI EM Index down 15%, it can also present opportunities.

The South African economic growth outlook, meanwhile, also remains grim with concerns around current debt levels, the impact of unstable electricity supply and general elections on 8 May.

Good time, bad time, anytime