While a globally diversified fund may be first choice, most South Africans have the majority of their assets in South Africa. Chris Freud, portfolio manager at Investec Asset Management warns against a knee-jerk response by selling off local assets at any price as he believes the rand is unlikely to weaken further. “I don’t think the rand will weaken much more from these levels. We may see some more weakness in the short term due to sentiment but in six to twelve months’ time we will not see the rand much weaker than current levels.”

Freud believes that for South African investors who have the stomach for short-term losses, the stock market will still outperform bonds, cash and property over the next three years but you need to select your stocks carefully.

Rand hedge shares

If you are very negative about South Africa and believe the rand will fall further, then you want to have rand hedge shares in your portfolio like British American Tobacco (BAT), MTN, SABMiller and Sasol.

These companies receive a significant amount of their earnings from overseas and therefore benefit from a weaker currency.

Retail shares

Most fund managers are negative on retail shares as the South African consumer comes under pressure, however, Freud sees opportunity in higher end retailers like Woolworths as higher income earners have been less affected by the credit bubble.

Banks

The share prices of the banks have fallen significantly as foreigners are concerned that our major banks will be caught up in the unsecured lending bubble. Concerns are that the banks will experience the same fate as African Bank which saw its share price halve in two weeks. Freud argues some banks like FirstRand have less exposure to the unsecured credit bubble and will not produce the negative earnings that foreigners expect. This is creating a buying opportunity for those willing to wait it out.

Gavin Wood, chief investment officer at Kagiso Asset Management also favours First Rand which is showing no signs of slowing down in terms of customer acquisition and has aggressively been chasing the young income earners’ market by inducing tech-savvy clients to switch to First National Bank. “The group is leveraging off new customers and using the bigger economy of scale to plough benefits back into rewards and returns. It’s a winning strategy,” Woods says. Woods’s other favoured bank is Standard Bank due to its earnings generated in the rest of Africa.

Platinum

With the labour unrest, many investors are shying away from platinum miners but Freud believes that the bad news is already priced into the shares and that some platinum shares like Lonmin are offering good value. “That won’t stop the share price from falling 10% in a few days when strikes start, but it will recover fast.”

Wood agrees and argues that while the demand for platinum is chugging along, supply has reduced massively. “For example, platinum is used for automobile catalysts, jewellery and investment use. On the supply side, there have been severe cutbacks in South Africa, largely due to mining strikes. The end result is that the platinum price needs to be 30 per cent higher,” says Wood.