Old Mutual International head Wayne Sorour said local investors should not rush into offshore based on emotional, knee-jerk decisions.
He said offshore investments were not the best way to go under the circumstances of a downgrade.
“It is important that South Africans continue to diversify their portfolios. A knee-jerk reaction is not required at this stage. We have a number of South African companies listed on the JSE that generate their revenue offshore anyway.
"So it is important as well to consider that when you make your investment decision. Those companies offer good returns, because they can generate income in foreign currencies as well,” said Sorour.
Last week S&P Global and Fitch downgraded South Africa to junk status.
Read also: Fitch follows S&P, downgrades SA
The country’s GDP is forecast at just 1.2 percent in 2017.
“A downgrade is a cause for concern, which is true. Maybe a better strategy for investors would be looking at reducing their exposure locally and increasing their offshore investment, but the key remains diversification,” said Sorour.
The rand, which had been the world’s best performing currency in 2017, gave up all its gains in just a week after President Jacob Zuma last month recalled former finance minister Pravin Gordhan from meeting investors in London and replaced him with Malusi Gigaba in a midnight cabinet shuffle.
Until then, the rand had appreciated 11 percent this year, making it the best performing among emerging markets currencies. But it has now parried the gains for the biggest decline among more than 140 currencies.
Sorour said the bigger economies of Europe, the US and Britain were at an advantage, because they had more opportunities for offshore investment. “Those developed countries probably control about 70 to 80 percent of world economy, so they offer more offshore investments than the local industries,” said Sorour.