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 The Sharenet Daily 
Tuesday, 15 October 2013 - 20:00
Top News
SA Business
Company News
Company Results
World Markets (Spot Prices)
JSE Today
JSE Trading Statistics
Major Moves
Index Summary
Latest Consensus Changes / Results Expected
Recent Dividends / Ex Div
Upcoming AGMs
Stock Exchange News Service (SENS)

Seed Weekly - The Pitfalls and Power of PPP

Investing offshore is often an emotive subject, particularly in South Africa where many investors got burnt at the turn of the century. In the early 2000’s the rand weakened considerably against most global currencies and investors sent large portions of their hard earned savings into developed market equities at exactly the wrong time. From the end of 2001 until now we have seen both the rand strengthening AND the local market outperforming in local currency terms, i.e. investors who sent money offshore lost out both from a currency AND a stock market perspective. These investors are therefore very sceptical about sending any more money out of the country as they don’t want to get burnt again. On the other side of the coin you have those investors that are worried that South Africa is ‘going down the tubes’ and will take ANY opportunity to get money out of the country.

The reality is, as always, somewhere in between and at Seed we attempt to take an unemotional look at where the opportunities lie. We realise that we will make mistakes, but if we consistently invest where the probabilities are the greatest then our clients will enjoy superior returns over time.

In our view, investors taking money offshore need to answer two explicit questions:
1. Is the rand over or under valued?
2. Are the offshore assets (equities, property, bonds, etc) over or under valued?

This report will look solely at the first question.

Purchasing Power Parity, more commonly known as PPP, is a common method of valuing currencies that is popular among academics and investment practitioners alike. Essentially PPP estimates the fair value of a country’s currency based on inflation differentials and the law of arbitrage. While this relationship often doesn’t hold over the short term, it has a good predictive power over the longer term.

All models have potential pitfalls where human intervention and logic are important to ensure that sound theoretical reasoning doesn’t result in illogical results. One potential pitfall of PPP is that the output is highly dependent on the starting date. One can get wildly different estimations of fair value by using the same model, but different starting dates. When looking at the fair value of the rand vs the US dollar one can calculate PPP anywhere between R 6.90 (1995 start) and R 17.72 (2002 start). Blindly inputting a starting date can therefore produce an output that is far removed from (what we perceive to be) reality.

The model’s output is extremely useful, and a powerful predictor of future movements, for investors who apply an element of logic when making their initial assumptions. At Seed we look at PPP from two viewpoints. The first looks at the average PPP for periods between 5 and 20 years (i.e. 180 observations). This method gives a current fair value of R 9.44 / USD. The second method uses the end of 1984 as a starting date, and the result is below. This model’s fair value is R 9.47 / USD compared to the current rate (as at 30 September) of 10.03.

When the rand is above or below the dotted line (1 standard deviation) we are fairly confident that it’s trading significantly away from fair value and make investment decisions accordingly (send ZAR offshore when it’s too strong and bring USD back to South Africa when it’s oversold).

We used this model to reduce our foreign currency exposure at the end of 2008, and then again to take it to its maximum at the end of 2010. The rand is currently fairly close to fair value and we therefore aren’t making investment decisions solely based on an expectation of currency movements.

Take care,

Mike Browne

021 914 4966

Tue, 15 Oct 2013
Top News
Local markets The JSE All Share gained 1.31% on Tuesday, with resources rising 1.89%, financials up 1.41%, industrials 1.02% higher, and gold miners down 0.14%.  Full story

Revenue increased to R946.6 million (R936.1 million). Gross profit declined to R380.2 million (R385.4 million) and operating profit was slightly higher at R69.8 million (R69.7 million). Net attributable profit was up 13% to R42.1 million (R37.4 million). In addition, headline earnings per sh  Full story
A senior Iranian negotiator cautioned it was too early to say whether the Islamic Republic and six world powers made progress on Tuesday towards resolving the decade-old standoff over Tehran's disputed nuclear ambitions.  Full story
The Social Democrats (SPD) bemoaned a lack of concessions from Angela Merkel, while her conservative allies accused the SPD of trying to dictate policy despite losing last month's election.  Full story
A powerful earthquake measuring 7.2 struck islands popular with tourists in the Philippines on Tuesday, killing at least 74 people, some as they prayed in a centuries-old church, and causing widespread damage to infrastructure, officials said.  Full story
U.S. stocks were down on Tuesday in light trading as prospects for an agreement to end the U.S. government's fiscal impasse shifted from. . .  Full story
Mixed signals from Washington on progress in the budget and debt talks left markets confused on Tuesday, boosting the dollar, but U.S. stocks. . .  Full story
European shares rose on Tuesday, with some benchmark indexes hitting multi-year highs, bolstered by indications that a deal could soon be clinched in. . .  Full story
Britain's top share index rose to its highest level so far in October on Tuesday, buoyed by signs of a deal on the. . .  Full story

Gold prices steadied on Thursday as an early drop to three-month lows tempted some buyers back to the market, but stayed under pressure. . .  Full story
U.S. stocks slightly pared earlier losses on Tuesday after Republican lawmakers in the U.S. House of Representatives said they hope to pass their. . .  Full story
S&P 500 futures turned negative in low volume in early trading on Tuesday after Citigroup reported a marginal fall in adjusted quarterly profit. . .  Full story
Britain's top share index rose to its highest level so far in October on Tuesday, buoyed by signs of a deal to fix. . .  Full story
SA Business
South Africa's Harmony Gold said on Tuesday July-September production likely increased by 12 percent from the previous quarter, helped by an. . .  Full story
Overstretched South Africans are further cutting back on spending, hit by higher fuel prices and tighter credit in Africa's top economy,. . .  Full story
Diageo, the world's biggest spirits group, should see sales growth in Africa accelerate as it expands into new markets like Ethiopia. . .  Full story
Barclays Africa said on Monday veteran banker Louis von Zeuner had retired from the boards of two of its South African. . .  Full story

South Africa's Liberty Holdings expects its African business outside of South Africa to contribute up to 9 percent of profit in. . .  Full story
Overstretched South Africans are further cutting back on spending, hit by higher fuel prices and tighter credit in Africa's top economy, the chief executive. . .  Full story
South Africa's Treasury sold a total 2.35 billion rand of its 2026, 2031 and 2037 government bonds on Tuesday.. . .  Full story
South Africa's Kumba Iron Ore said on Tuesday the expansion of its Sishen pit may be impacted by a delay or. . .  Full story

South Africa's rand was largely steady against the dollar early on Tuesday with ongoing U.S. debt ceiling negotiations the main driver of sentiment in the absence of market-moving domestic news.. . .  Full story
Company News
Old Mutual will enter a close period under the Model Code on Securities Dealing and a quiet period for Investor Relations. . .  Full story
PPC announced that Mr Peter Esterhuysen, Director, Business Development, has resigned from PPC and from the board on 15 October 2013,. . .  Full story
Shareholders were advised that Mr J F Malherbe, non-executive director of Shoprite, will not be standing for re-election as a director. . .  Full story
The board of Stefstock announced that the group's results for the six months ended 31 August 2013, being earnings and headline. . .  Full story

Anglo announced the appointment of Mr Ruben Fernandes as CEO of its Nickel, Niobium and Phosphates businesses, with effect 1 December. . .  Full story
Shareholders are advised that at the AGM of Afdawn held today, 15 October 2013, ordinary resolutions number 5 and number 9. . .  Full story
According to Business Day, Zurich now owns 100% of BnB Sure, a transaction that will allow the insurer to provide insurance. . .  Full story
Anglo draws attention to an announcement issued by Kumba Iron Ore Ltd., the text of which is set out below:. . .  Full story
Company Results
Revenue increased to R434.6 million (R400.7 million). Gross profit declined to R62 million (R68.3 million) and operating profit was also lower. . .  Full story
Revenue from sale of goods shot up to R2.7 billion (R655.4 million) and gross profit jumped to R401.6 million (R86.7 million).. . .  Full story
These the first full-year results since Beige changed its year-end to June each year from March and are therefore incomparable to. . .  Full story
Revenue grew 24% to R263.5 million (R212.9) and gross profit rose 20% to R103.2 million (R85.7 million). Operating profit was 11%. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0044297.17574.011.31%
JSE Top 4017:0039592.96572.791.47%
JSE Gold17:001184.59-1.68-0.14%
JSE Financial17:0032599.87452.651.41%
JSE Industrial17:0058199.34586.951.02%
JSE Indust 2517:0050925.35572.131.14%
JSE Resource17:0050031.26928.851.89%
DJ Futures19:5215170.00-55.00-0.36%
DJ Ind19:5815246.68-54.58-0.36%
SP 50019:581705.95-4.19-0.25%
FTSE 10017:356549.1141.460.64%
All Ords07:475259.2052.701.01%
NZSE 5006:504747.9313.760.29%
NameTimeRPMove% Move
Gold $19:591274.591.230.10%
Gold R19:5812656.78-54.44-0.43%
Gold R/kg19:58406916-2860-0.70%
Silver $19:5921.2100-.0290-0.14%
Platinum $19:591381.004.000.29%
Palladium $19:59704.60-8.00-1.12%
Brent Crude19:58110.22-1.06-0.95%
Rand / Dollar19:599.93750.02220.22%
Rand / Pound19:5515.84840.02710.17%
Rand / Euro19:5513.4147-0.0366-0.27%
Rand / NZD14/108.23640.04340.53%
Rand / AUD19:559.46850.05060.54%
Yen / Dollar19:5998.4800-0.1730-0.18%
Euro / Dollar19:550.74070.00350.47%
Dollar / Euro19:591.3498-0.0060-0.45%
Pound / Dollar19:550.62560.00010.02%

Click here for the Sharenet Spot Price page
The JSE Today

Trading Statistics
* Includes all listed instruments on the JSE
Major Moves Up
SharenameSaleMove% MoveVolume
1 ROCKWELL  3693911.82.%10003
2 DAWN  979798.78.%21870
3 CBH  335247.72.%9100
4 S-OCEAN  155106.90.%100000
5 BEE-SASOL  3750024006.84.%201
6 NIVEUS  17001006.25.%383000
7 STEFSTOCK  949495.44.%103866
8 KEATON   210105.00.%7973
9 RMIH  27591094.11.%758720
10 IMPLATS  121684684.00.%3090697
11 CAPITEC  217008283.97.%265561
12 BCX  569203.64.%21976
13 NASPERSN  9539731003.36.%1633867
14 PINNACLE  2331713.14.%385375
15 BRIMSTON  1350413.13.%1414
16 SIBANYE  1259383.11.%1177746
17 PERGRIN  1325393.03.%4500
18 ANGLO  248777212.98.%3196432
19 SANLAM  49431292.68.%3623937
20 PREMIUM  1745452.65.%145880

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Major Moves Down
SharenameSaleMove% MoveVolume
1 CENRAND  275-135-32.93.%7735
2 ASCEN B  220-20-8.33.%29716
3 GOLDONE  190-17-8.21.%23600
4 BELL  2250-147-6.13.%7236
5 VALUE  680-40-5.56.%18012
6 MMG  1149-61-5.04.%13523
7 POYNTING  160-8-4.76.%61900
8 WITSGOLD  840-40-4.55.%16500
9 MAS  1800-75-4.00.%11060
10 INTEWASTE  111-4-3.48.%336156
11 BUILDMX  280-10-3.45.%11237
12 LITHA  280-8-2.78.%274285
13 COMAIR  273-7-2.50.%957834
14 DIGICOR  161-4-2.42.%89500
15 PAN-AF  243-6-2.41.%110733
16 CALGRO  625-15-2.34.%141419
17 FINBOND  215-5-2.27.%47255
18 GROUP-5  4406-94-2.09.%68085
19 DRDGOLD  523-11-2.06.%58307
20 CAPEVINH  725-15-2.03.%808459

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New Highs
SharenameSaleHighMove% MoveVolume
1 METAIR  395039511002.60.%190166
2 STEINHOFF  38263826942.52.%6144014
3 ELBGROUP  39983999982.51.%1200
4 FIRSTRAND  35483554732.10.%6969057
5 SASOL  502015084910142.06.%2334982
6 CML  749075061371.86.%462772
7 RMBH  48334841831.75.%1677329
8 STANBANK  12440124792051.68.%3206847
9 REDEFINTL  811830111.38.%340726
10 HCI  13961139611280.93.%136354
11 EOH  73507350560.77.%249905
12 NEDCOR  20829209331290.62.%637595
13 CAPCO  56005602210.38.%175004
14 SABVEST-N  190120500.600

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New Lows
SharenameSaleLowMove% MoveVolume
1 LITHA  280230-8-2.78.%274285
2 GFIELDS  43474282-63-1.43.%1750450

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Index Summary
Index NameRPMove% Move
Top 4039,592.96572.791.47%
Mid Cap58,513.67299.800.51%
Small Cap48,996.16251.060.52%
Resource 2050,031.26928.851.89%
Industrial 2550,925.35572.131.14%
Financial 1512,343.63204.461.68%
Financial & Ind. 3054,126.33699.201.31%
All Share44,297.17574.011.31%
Oil & Gas 37,989.39767.342.06%
Mining 30,052.09535.671.81%
Gold Mining1,184.59-1.68-0.14%
Platinum Mining49.351.182.45%
GENERAL MINING8,663.15167.241.97%
Oil & Gas Producers 20,426.19412.582.06%
Basic Materials 26,779.90440.821.67%
Chemicals 23,759.7793.110.39%
Forestry & Paper 28,191.44271.260.97%
Industrial Metals 24,435.58-57.64-0.24%
Industrials 43,427.55174.640.40%
General Industrials 129.921.110.86%
Consumer Goods 52,949.40309.840.59%
Automobiles & Parts 8,944.61226.442.60%
Household Goods260.0662.52%
Health Care 75,016.57225.610.30%
Beverages 164.412.221.37%
Index NameRPMove% Move
Food Producers 71,540.73350.000.49%
Personal Goods 1,
Consumer Services 10,355.87232.222.29%
General Retailers 65,979.90905.061.39%
Travel & Leisure 5,602.73-13.56-0.24%
Media 208.446.693.32%
Support Services 2,634.3518.900.72%
Telecommunications 9,467.07119.131.27%
Financials 32,599.87452.651.41%
Banks 57,416.40930.341.65%
Non-life Insurance 50,125.62612.541.24%
Life Insurance 30,634.52704.252.35%
General Financial 2,997.7715.360.52%
Technology 44,870.99548.841.24%
SHARIAH TOP40 3,747.13611.66%
FTSE/JSE SHARIAH ALL3,869.31541.42%
COAL MINING20,655.482671.31%
FTSE JSE Fledgling 6,011.13-26-0.43%
FTSE/JSE Alt X 1,036.50-3-0.25%
RESOURCE 27,343.254991.86%
DIVIDEND PLUS217.5220.75%
FTSE/JSE RAFI 408,783.021331.54%
Capped Top 4020,978.843061.48%
Capped All Share22,442.422901.31%
JSE TABACO 6,555.24-51-0.77%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
16/10/2013AQUARIUSSeptember 2013 (Q)
16/10/2013AQUARIUSCVTSeptember 2013 (Q)
16/10/2013DATATECAugust 2013 (Interim)
16/10/2013FORBESAugust 2013 (Interim)
16/10/2013ODERSONAugust 2013 (Interim)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
HOLDSPORT11/10/1329/11/1309/12/13ZAR 0.7500
FPT10/10/1325/10/1304/11/13ZAR 0.2389
DCENTRIX08/10/1325/10/1304/11/13ZAR 0.1232
BARWORLD6%P07/10/1325/10/1304/11/13ZAR 0.0600
NTC PREF01/10/1325/10/1304/11/13ZAR 3.5159
Ex Div**
Share NameDec-DateLDTPay-DateAmount
WBHO02/09/1311/10/1321/10/13ZAR 2.3300
CAPITEC25/09/1311/10/1321/10/13ZAR 2.0300
A-V-I09/09/1311/10/1321/10/13ZAR 1.7000
JDGROUP26/08/1311/10/1321/10/13ZAR 1.1700
PUTPROP20/09/1311/10/1321/10/13ZAR 0.1800

Upcoming AGMs**
CodeCompany NameDateStatus
ADWAfrican Dawn Capital Ltd.15/10/2013Confirmed
DSTDistell Group Ltd.16/10/2013Confirmed
WSLWescoal Holdings Ltd.16/10/2013Confirmed
CVHCapevin Holdings Ltd.17/10/2013Confirmed
AFRAFGRI Ltd.18/10/2013Confirmed

Stock Exchange News Service
15/10/201317:30OLD MUTUAL PLC - Conference participation by the Group during forthcoming close ...
15/10/201317:30NETCARE LIMITED - Voluntary disclosure of short term extension of GHG PropCo 1 d...
15/10/201317:00PPC LIMITED - Resignation of a Director of PPC Limited
15/10/201317:00SHOPRITE HOLDINGS LIMITED - Change to the board of directors
15/10/201316:40STEFANUTTI STOCKS HOLDINGS LTD - Trading statement
15/10/201316:35IVUZI INVESTMENTS LIMITED - Full Capital Redemption - IVA342
15/10/201316:35MINE RESTORATION INVESTMENTS LTD - Update on the Commissioning of the Coal Briqu...
15/10/201316:32RMB HOLDINGS LIMITED - Dealings in securities by a director
15/10/201316:30NICTUS BEPERK - Change to the board of directors
15/10/201316:30HOSPITALITY PROPERTY FUND LIMITED - Interest Rate Reset - HPF02 and HPF03
15/10/201316:20HULAMIN LIMITED - Dealing in securities by a director
15/10/201316:15VALUE GROUP LIMITED - Unaudited Interim Results for the 6 months ended 31 August...
15/10/201316:05NUTRITIONAL HOLDINGS LIMITED - Updated Trading Statement and Appointment of Comp...
15/10/201316:01ASTRAL FOODS LIMITED - Disclosure of beneficial interests securities
15/10/201315:48BLUE LABEL TELECOMS LIMITED - Director's Dealings
15/10/201315:43HARMONY GOLD MINING COMPANY LIMITED - Harmonys quarterly production guidance
15/10/201315:32RMB CIS MANCO (PTY) LIMITED - Partial delisting of RMB inflation-x securities
15/10/201315:08INVESTEC BANK LIMITED - Expiry SPXIID
15/10/201315:01JUBILEE PLATINUM PLC - Director's trade in securities
15/10/201314:55RCS INVESTMENT HOLDINGS LTD - Interest Rate Reset - RCSB03
15/10/201314:40GROWTHPOINT PROPERTIES LIMITED - GRT03 - Interest Rate Reset
15/10/201314:38RMB HOLDINGS LIMITED - Joint media release: executive succession
15/10/201314:30TIMES MEDIA GROUP LIMITED - Dealing in Times Media Group Limited shares by an As...
15/10/201314:00ANGLO AMERICAN PLC - Anglo American appoints Ruben Fernandes as CEO of its Nicke...
15/10/201313:53RMB HOLDINGS LIMITED - Executive succession planning
15/10/201313:48RAND MERCHANT INSURANCE HLDGS LTD - Executive succession planning
15/10/201313:30INGUZA INVESTMENTS (RF) LIMITED - Full Capital Redemption - ING46
15/10/201313:30FIRSTRAND BANK LIMITED - New Instrument Listing-FRC184
15/10/201312:42AFRICAN DAWN CAPITAL LIMITED - Results of Annual General Meeting
15/10/201312:30COMBINED MOTOR HOLDINGS LIMITED - Interim Results for the six months ended 31 Au...
15/10/201312:27ELB GROUP LIMITED - Dealing in securities by a director
15/10/201311:08JOHN DANIEL HOLDINGS LIMITED - Cautionary Renewal Announcement
15/10/201311:02COMPU-CLEARING OUTSOURCING LIMITED - Director's dealings in securities
15/10/201311:00ISA HOLDINGS LIMITED - Renewal of cautionary announcement
15/10/201310:53MORVEST BUSINESS GROUP LIMITED - Results of the General Meeting
15/10/201310:51TASTE HOLDINGS LIMITED - Change to the Board of Directors - Retirement of Direct...
15/10/201310:47AFRICAN DAWN CAPITAL LIMITED - Shareholder update
15/10/201310:20ANGLO AMERICAN PLC - Anglo American update re. Kumba Iron Ore
15/10/201310:00SEKUNJALO INVESTMENTS LIMITED - Renewal of cautionary announcement
15/10/201309:51TASTE HOLDINGS LIMITED - Unaudited condensed consolidated results for the six mo...
15/10/201309:30NEW GOLD ISSUER LIMITED - NGPLT - Listing of additional NewGold Platinum Debentu...
15/10/201308:32BHP BILLITON PLC - Macquarie Western Australia Forum
15/10/201308:30CONDUIT CAPITAL LIMITED - Disposal By Conduit Capital Of Its Investment In Amalg...
15/10/201308:30THE STANDARD BANK OF SA LTD - The Standard Bank of South Africa Limited New Fin...
15/10/201308:15KUMBA IRON ORE LIMITED - Sishen Western Expansion Project
15/10/201308:00COAL OF AFRICA LIMITED - Vele Colliery Update
15/10/201307:05BRITISH AMERICAN TOBACCO PLC - Transaction in own shares

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