How can South Africans protect their foreign investments against events such as the recent terrorist bombings in London?
There are very few securities that remain untouched during major crises such as the recent bombings in London, 9/11 or potentially even naturally occurring disasters such as hurricanes and floods.
After the recent terrorist attacks in London, the markets fell and many South Africans saw the value of securities they hold move violently. Disturbingly, many would have been unable to contact their broker in London because the telecoms network was overloaded.
It is near impossible to plan for such events and this can leave investors exposed.
One solution is for investors to hedge their exposure. This can be done via Global Trader, the country`s fastest growing financial services institution and the leading online and telephone market-maker in financial derivatives. Since inception in South Africa in 2000 they have developed a global reach into Europe, North America and Asia, and; along with South Africa and the UK, enjoy a physical presence in Canada and Thailand - making them the first global player in the Spread Trading and Contract For Difference (CFD)* trading industry
During the London bombings, Global Trader`s Johannesburg office was still operational as was its website. Investors could, and some did, immediately hedge their position to protect against negative market movement. This was planned and executed in minutes, protecting the investor against losses.
Charles Savage, Managing Director of Global Trader, South Africa, says : "An investor was holding a large share portfolio when the terrorist attack occurred in London. This is a long term portfolio - and his outlook remains positive over the long term. The general immediate reaction by investors globally to the terrorist attack was one of panic selling - which in turn had a very negative impact on share prices. One alternative the investor had was to sell his entire share portfolio. This would have been very costly and of course unnecessary if share prices recovered again within a day or two. The second alternative was to hedge his portfolio by Spread Trading or CFD Trading with Global Trader. He sold (went short) the shares that he owned using Spread Trading. The losses he made on his share portfolio were offset by the gains he made on the being short the spread contracts.
Whenever there was an indication that the markets turned around again, he just closed his short spread positions and was left with his original portfolio. It is in this way the profits to date can be locked in, and further market movements have no effect."
Global Trader`s alternative investment instruments provide both sophisticated individual and professional traders alike with more efficient access to global markets as well as unique opportunities to protect their investments as the example outlined demonstrates.
The company`s success to date can be measured on the volume that they have achieved - at present they conduct over 300,000 trades per year, worth over US$5 billion per annum, for clients in 26 countries. In addition, Global Trader`s UK operation was awarded a full securities trading license by the UK`s Financial Services Authority (FSA) which is the world`s leading securities regulator in Global Trader`s sector.
In closing, Savage says, "Our competitive advantage has and will remain in not just understanding the needs of our clients, but also what financial products are most relevant to the times that the world is experiencing at the moment."
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Spread Trading and CFD Trading is one of the world`s fastest growing and flexible forms of financial trading, particularly with hedge fund managers and sophisticated investors. Developed in the UK over the last 20 years as an alternative financial product, they now account for up to 50% of the total daily turnover on the London Stock Exchange.
Spread Trades and CFD Trades are in effect a "virtual trade", in that you gain complete access to the price movements in the stock without actually having to take ownership of the underlying asset, which also means you pay no MST saving 0.25% on every trade. In essence, they are financial instruments that mirror the movements of the underlying stock, making them the perfect tool for both speculation and hedging.
Global Trader also has a free simulated platform where investors can familiarise themselves with the platform and the products. This is accessed via their website: www.gt247.com
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