Opinion: Structured Investments during COVID-19: What is working right now?

MyPR: Opinion: Structured Investments during COVID-19: What is working right now?:

Daniel Kibel, Founder and Director of CM Tradingshares a few thoughts about the current investment climate, as the COVID-19 pandemic continues to affect global investment outcomes.

“There is no single ‘winning answer’ in terms of making lucrative investments at the best of times. During a pandemic, things can seem even murkier. But no matter what the circumstances are, sound investment opportunities are there, if you pay enough attention.

“The South African economy is under incredible strain at the moment. In fact, projections show that unemployment could be anywhere between 30 and 50% in South Africa right now. This is going to cause a ripple effect that will hit local companies hard because people have got less money.

“With that in mind, investing offshore is definitely a good way to go. Local companies currently just don’t have the growth prospects that players like Amazon and Tesla have; or the investment potential that gold or currencies have. These investments are far more likely to make you a profit right now.

“The best returns for offshore equity investors are currently present in bigger, ‘safer’ shares, like the aforementioned Google, Alphabet, Tesla, Amazon, etc. These are ‘flying off the shelves’ and continuing to rise because people are turning to them as bankable in unpredictable times.

“Side-lining from that thought, supermarkets can be looked at as individual equities. And gold – which has hit almost 19,50 – is at an all-time high. That has certainly been very interesting to our investors.

The global economic context and risk

“Yes, conventional thought certainly dictates that, when there is a crisis, you put your money somewhere safe. So, one assumes, for instance, that if your money is invested in the United States, it’s safer than it would be in South Africa.

“Having said that, the investors that make the biggest money are the ones that take the biggest risks. And I am absolutely sure that there are a number of serious investors who are looking at South Africa, Brazil and other less safe options – perhaps not right now but certainly in the future. So, global opportunities do exist. And while most people will want to be safe, those prepared to take heavier risks may look at emerging markets like South Africa.

On economic recovery

“In the longer term, as we emerge from the pandemic, stronger and safer economies are, of course, likely to recover far quicker than developing or smaller ones. So, for instance, the United States will probably bounce back relatively quickly. A country like Brazil, which has a more compromised economy, is likely to take longer.

“Where there are underlying strong fundamentals in an economy, and where the government is investing in businesses; those are – more than likely – going to be the places that react better and recover quicker.

“A recovery in South Africa is going to take quite a while. The economy was not in a particularly healthy state before COVID-19. And COVID has caused quite a few earthquakes in many economies – but far more so in ones that weren’t in a good state to begin with.

“Ultimately, looking beyond the shores of South Africa now is probably the wisest choice. Whether this is a long or short-term solution will be revealed as the world slowly comes out of all this. Keep paying attention and your investment journey will unfold organically”.

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