Johannesburg - As uncertainty continues to be the order of the day following the UK's decision to leave the European Union on Friday, investors are being urged to keep calm and carry on.
Brits went to the polls on Thursday to vote as to whether the country should exit the EU, ending a 40-year marriage, with 51.9 percent of Brits voting in favour of leaving in what many see as a surprise move.
Ray Wallace, CIO of Taquanta Asset Managers and fund manager of the Nedgroup Investments money market funds, says there is no need for investors to panic, particularly those who have sufficient, well diversified cash allocations.
"We are entering unchartered waters and there is a lot of uncertainty at the moment. What we do know for sure is that we can expect further volatility in the near future. In this sense, we urge investors to remain calm and to carefully assess their portfolios to ensure that they have protective measures in place," he says.
Investment Solutions says "fundamental values in currencies and asset markets play out over the long term. This means that investors should stick to their long-term investment plan - even when short-term outcomes in markets are volatile. We caution against making investment decisions based on how markets react in the short term. History has shown that investors are driven by fear and greed, which more often than not means buying high and selling low. Adopt a sound strategy based on your needs."
Mark Appleton, SA Head of Multi Asset and Strategy at Ashburton Investments adds although nobody knows for sure what the real economic effects of Brexit will be, the sort-term is likely to see SA's currency losing ground against all other currencies expect the pound, weaker equities and weaker economic growth.
Appleton adds SA, which has R1.5 trillion invested in the UK, could be facing slower economic growth in the long-term and this heightens the possibility of a downgrade. Fitch and S&P recently affirmed SA at a notch above junk, but warned this could be revised, while Moody's has SA a level higher than that.
Around 4 percent of SA exports goes to the UK.
Yet, says Appleton, now is not the time to panic. "In many instances we find that there is more than enough bad news already being reflected in the price.
"As long term investors, it is part of our investment philosophy and process to emphasise quality. It is this quality that is likely to hold us in good stead in these uncertain times."
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Director of Investments at Old Mutual, Hywel George, argues, however, that markets will be volatile for some time. "Given the global significance of the decision, investors can expect considerable volatility in the short-term; at least until the medium- to longer-term consequences of the UK leaving the EU become clear. As an emerging market, South Africa is likely to be caught in the cross winds of this risk-off investment environment."
Yet, he says, this paves the way for opportunities to arise, and investors should not panic, but rather stay the course.
Vestact says investors should do nothing. "In fact, in the great British tradition of doing little in times of adversity, Keep Calm and Carry On. Or in French if you will: Restez Calme et Continuez, or German: Bewahre Ruhe mach weiter."
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The National African Chamber of Commerce (Nafcoc), however, is concerned about the move, saying in a statement the decision "will have a profound effect on the current world trading architecture and its impact will not only be felt in England and the EU". In particular, it says, South Africa as a major trading partner will be particularly affected.
"Already, the immediate economic effects of this seismic decision have been felt in the UK. The weakening of the Pound and the revision of Britain's credit rating to negative outlook are some of the first round effects."
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It adds second round effects will, without a doubt, affect South Africa's export earnings at the time when it is currently in need of buoyant export performance to address its external imbalance.
The Presidency said in its reaction that there will be no immediate implications for SA exports into UK. "The SA government will consider all the options available and start engagements with the UK."
IOL
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