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Investors shy away from offshore options
EXCHANGE CONTROL
FINANCIAL institutions were disappointed and the Reserve Bank smiling as local funds moved out of the country in dribs and drabs in the six weeks since the July 1 partial relaxation of exchange controls on individuals. Last month R144-million was invested in foreign currency - a small sum considering the Reserve Bank had braced itself for an outflow of R5-billion. James Cross, deputy governor of the Reserve Bank, told BT Money this week that early indications were offshore investing had slowed even further this month. This could, however, change at any time. Cross said there were a number of people who had obviously taken the view of "don't rush for the door". While people were burdened by high household debt, it was hard to see them taking their savings and investing them offshore at a lower interest rate than those offered in South Africa, he said. Asked whether he saw offshore investments picking up in the future, Cross said this depended on a number of factors such as the exchange rate, the country's stability and the Reserve Bank's monetary policy. Commercial banks are disappointed with the response by local investors. Org Ehlers, Absa's general manager of commercial international banking, confided that Absa was lucky it had not invested in a new computer system, but had made use of an existing one. In total, R38.5-million was invested offshore through his division by 310 investors.
Standard Bank reported that about 40% of customers who invested in foreign currency elected to stay onshore by using foreign currency bank accounts. This greatly surpassed the bank's expected 10%. The average amount invested in these accounts was R110 000, and not a single investor had split investments in terms of onshore and offshore. Derick Finlayson, director of asset management at Standard Corporate & Merchant Bank, believes that over time - as people come to better understand offshore products - investment flows will increase. He said a further plunge in the value of the rand would act as a catalyst. Carey Millard, Nedcor's head of specialised investment products, said the investing public had certainly been cautious about entering uncharted territory. He added, however, that there had been a lot of interest shown. Nedcor had achieved its fair share of offshore investment, he said. "It's a short-term disappointment, perhaps, but it's the long term we are concerned with."
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