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 The Sharenet Daily 
Tuesday, 19 November 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 - Equity Market Returns

One of the main tools used at Seed to determine whether the local equity market is expensive or not is the ALSI’s historical PE ratio. We have seen that, over time, a low starting PE ratio has typically resulted in excellent returns to investors over a 5 year period, while a high starting PE has typically resulted in relatively poor 5 year returns.

Chart 1 below demonstrates this relationship, with each blue dot indicating a starting PE level and subsequent 5 year return (annualised). From this chart one can see the relationship between starting PE and subsequent return and that the market is currently extremely expensive.

Chart 1: Starting ALSI PE v Subsequent 5 Year Return

The logical (often rhetorical) question that we get asked after showing this information to clients or other investment professionals is, “I guess that means that you expect a significant market correction sooner rather than later?”

Intuitively we’d typically agree with this statement, but we delved a little deeper into what’s happened in the past in expensive markets (i.e. when the starting PE of the ALSI was above 17). It was interesting to note that on a 12 month horizon, investors had a similar chance of losing capital when the market was expensive (i.e. PE above 17) as across all market conditions (all observations). Chart 2 below indicates this phenomenon.

Chart 2: 12 Month ALSI Returns – Various Criteria

This analysis indicates that investors into local equity should expect negative 12 month returns approximately 1 in every 5 years if they don’t take heed of starting valuations. When the market is expensive (PE above 17), this ratio is similar. What is interesting is that when markets are expensive, the probability of good returns (i.e. in excess of 20% pa) falls right down to approximately 10%, compared to a 50% probability over all periods in the analysis (322 observations).

Chart 2 also indicates the power of investing when the market is cheap (i.e. PE below 10). In these periods investors have received a 12 month return below 10% less than 10% of the time compared to returns in excess of 20% (over 12 months) in 80% of the observed periods.

From this (admittedly simple) analysis we can conclude that while we don’t think there’s a heightened chance of a market crash when compared to history, investors should brace themselves for the high probability of sub optimal returns over the next 12 months. Investors should also be aware that should there be a fall in markets, it is highly likely that it will be larger than a typical correction.

As a result of this, and other, analysis the asset allocation Funds that Seed manages (namely Seed Flexible Fund and Seed Absolute Return Fund) are currently conservatively positioned, using local equity as a measure, compared to historical and strategic weightings.

Take care,

Mike Browne

021 914 4966

Tue, 19 Nov 2013
Top News
Local markets Losses in gold mining shares led a general slide on the JSE today, with the All Share finishing 0.64% lower on Tuesday.  Full story

South African stocks edged up on Monday as a global equity rally helped lift investor favourites such as e-commerce firm Naspers, although nagging concerns about valuations kept gains in check. Shares of Nampak rose 3.3 percent to 31.77 rand after the packaging firm said it would s  Full story
President Cristina Fernandez's new Cabinet picks confirmed a deepening of Argentina's left-leaning economic model rather than a policy switch needed to confront escalating inflation and dwindling foreign currency reserves.  Full story
Two suicide bombings rocked Iran's embassy compound in Lebanon on Tuesday, killing at least 23 people including an Iranian cultural attaché and hurling bodies and burning wreckage across a debris-strewn street.  Full story
Russian courts granted bail to nine jailed foreign Greenpeace activists on Tuesday, a turnaround in Russia's treatment of 30 people facing trial over a protest against Arctic oil drilling.  Full story
European shares fell in thin trade on Tuesday as negative comments from U.S. billionaire investor Carl Icahn drew attention to a mixed earnings. . .  Full story
The Dow Jones industrial average climbed above 16,000 for a second day, bolstered by a rally in Home Depot shares after stronger-than-expected earnings.. . .  Full story
Britain's top share index slipped on Tuesday, hurt by testing firm Intertek on worries over a slowdown in its business, though analysts were. . .  Full story
World stock markets mostly dipped on Tuesday after the OECD cut its global growth forecasts, though expectations for continued stimulus from the U.S. Federal. . .  Full story

Gold inched up on Tuesday, stabilising after sharp losses seen in the previous session, as investors gauged Federal Reserve officials' comments about the outlook. . .  Full story
U.S. stocks opened flat at the open on Tuesday after the Dow and S&P 500 hit record highs the previous session, with a. . .  Full story
Testing firm Intertek led the FTSE 100 lower on Tuesday on concerns over a slowdown in its business, while doubts linger more broadly. . .  Full story
European shares eased on Tuesday, with caution on stocks from U.S. billionaire investor Carl Icahn and a retreat on Wall Street overnight encouraging. . .  Full story

South African electricity utility Eskom reduced power supply on Tuesday to mining giant BHP's aluminium smelters, in line with an agreement. . .  Full story
South African electricity utility Eskom declared a power "emergency" on Tuesday and urged key industrial customers to cut consumption to reduce. . .  Full story
A shareholder of South Africa's Adcock Ingram has filed a complaint with the Johannesburg Stock Exchange accusing the drugmaker's board of. . .  Full story
South African business confidence remained in negative territory in the fourth quarter of the year, with retailers particularly downbeat about prevailing. . .  Full story

Shareholders of South Africa's Afgri Ltd on Tuesday overwhelmingly voted in favour of a $258 million buyout by a investment firm. . .  Full story
South Africa's rand held steady against the dollar early on Tuesday, looking set for a fifth day of recovery from last. . .  Full story
South African fixed-line operator Telkom SA is in talks with some parties over the future of its struggling mobile business, its. . .  Full story
South Africa's rand firmed against the dollar on Monday as global markets were lifted by the prospect of ambitious economic reforms. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0045138.13-290.72-0.64%
JSE Top 4017:0040337.43-256.53-0.63%
JSE Gold17:001273.17-32.31-2.47%
JSE Financial17:0032830.44-230.82-0.70%
JSE Industrial17:0059321.43-277.27-0.47%
JSE Indust 2517:0051905.15-246.77-0.47%
JSE Resource17:0051396.34-489.21-0.94%
DJ Futures19:5815970.0029.000.18%
DJ Ind19:5816002.6626.640.17%
SP 50019:581792.891.360.08%
FTSE 10018:356698.01-25.45-0.38%
All Ords07:505347.80-30.10-0.56%
NZSE 5006:484862.51-29.53-0.60%
NameTimeRPMove% Move
Gold $19:591274.52-1.18-0.09%
Gold R19:5812976.8361.010.47%
Gold R/kg19:58417152-1328-0.32%
Silver $19:5920.3300-.0670-0.33%
Platinum $19:561414.808.300.59%
Palladium $19:58720.005.000.70%
Brent Crude19:58107.90-.65-0.60%
Rand / Dollar19:5910.18290.05840.58%
Rand / Pound19:5516.37980.09900.61%
Rand / Euro19:5513.77980.10430.76%
Rand / NZD19:588.51190.08110.96%
Rand / AUD19:559.59680.08190.86%
Yen / Dollar19:59100.09300.15600.16%
Euro / Dollar19:580.7388-0.0018-0.24%
Dollar / Euro19:591.35360.00320.24%
Pound / Dollar19:550.6198-0.0007-0.11%

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 INDEQTY  4906515.29.%3900
2 LITHA  300259.09.%627012
3 KEATON   269218.47.%320549
4 PALLINGHT  270166.30.%876539
5 KELLY  175106.06.%31200
6 CARGO  21001005.00.%5051
7 TRADEH  1350644.98.%4919
8 METMAR  14974.93.%450
9 PREMIUM  1855844.74.%1000280
10 GOLDONE  20084.17.%15747
11 TRNSHEX  357133.78.%442
12 ARB  580203.57.%380
13 CURRO  2016603.05.%130432
14 YORK  380102.70.%14000
15 FONEWORX  23662.61.%3170
16 GROUP-5  43501102.59.%146766
17 BLACKSTAR  1149292.59.%117
18 ESORFRANK  12032.56.%753721
19 ABLN  607142.36.%15427082
20 TIGBRANDS  310006662.20.%705139

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Major Moves Down
SharenameSaleMove% MoveVolume
1 NHMN  109-43-28.29.%548374
2 ROCKWELL  355-59-14.25.%1830
3 SYNERGY-A  900-80-8.16.%5000
4 ATLATSA  509-40-7.29.%81480
5 SEARDEL  280-20-6.67.%28602
6 HULAMIN  515-33-6.02.%438610
7 DIGICOR  161-9-5.29.%62177
8 ACCENT  108-6-5.26.%8850
9 NIVEUS  1675-76-4.34.%1000
10 ANGGOLD  14945-635-4.08.%1632648
11 AVENG  3001-123-3.94.%642935
12 AMECOR  250-10-3.85.%30000
13 ONELOGIX  385-15-3.75.%17657
14 NETCARE  2352-78-3.21.%2608398
15 WESCOAL  242-8-3.20.%246751
16 TSOGO-SUN  2700-84-3.02.%1281405
17 ANGLOPLAT  41200-1250-2.94.%160464
18 RBPLAT  6052-168-2.70.%163023
19 SHOPRIT  17545-482-2.67.%1020641
20 JDGROUP  2989-82-2.67.%280067

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New Highs
SharenameSaleHighMove% MoveVolume
1 PALLINGHT  270274166.30.%876539
2 CARGO  210021001005.00.%5051
3 SASFIN  48784984962.01.%14060
4 TREMATON  38038051.33.%9500
5 STEINHOFF  41194161220.54.%7448575
6 HCI  1479915543-1-0.01.%55107
7 SAPPI  32393429-7-0.22.%4897393
8 ARCMITTAL  44404559-25-0.56.%176065
9 PIKWIK  21402158-13-0.60.%50117
10 ELBGROUP  43504551-50-1.14.%4821
11 PNR-FOODS  86008945-170-1.94.%65688

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New Lows
SharenameSaleLowMove% MoveVolume
1 ARGENT  505500-10-1.94.%33107
2 GLENCORE  52965229-28-0.53.%2465247

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Index Summary
Index NameRPMove% Move
Top 4040,337.43-256.53-0.63%
Mid Cap59,672.98-497.47-0.83%
Small Cap49,987.2822.180.04%
Resource 2051,396.34-489.21-0.94%
Industrial 2551,905.15-246.77-0.47%
Financial 1512,347.04-116.09-0.93%
Financial & Ind. 3054,951.77-271.49-0.49%
All Share45,138.13-290.72-0.64%
Oil & Gas 38,893.70-381.40-0.97%
Mining 30,887.35-297.39-0.95%
Gold Mining1,273.17-32.31-2.47%
Platinum Mining52.12-.48-0.91%
GENERAL MINING8,854.31-68.58-0.77%
Oil & Gas Producers 20,912.42-205.07-0.97%
Basic Materials 27,386.01-246.67-0.89%
Chemicals 23,709.04-182.99-0.77%
Forestry & Paper 27,959.43-131.35-0.47%
Industrial Metals 23,115.9129.460.13%
Industrials 43,360.83-239.82-0.55%
General Industrials 129.49-.55-0.42%
Consumer Goods 56,064.5583.850.15%
Automobiles & Parts 8,695.52.000.00%
Household Goods279.9710.54%
Health Care 74,543.89-1060.47-1.40%
Beverages 179.96.310.17%
Index NameRPMove% Move
Food Producers 71,858.27497.090.70%
Personal Goods 1,030.12-.70-0.07%
Consumer Services 10,255.17-109.83-1.06%
General Retailers 63,190.61-865.11-1.35%
Travel & Leisure 5,636.3211.650.21%
Media 205.22-1.31-0.63%
Support Services 2,625.004.990.19%
Telecommunications 9,364.74-99.64-1.05%
Financials 32,830.44-230.82-0.70%
Banks 55,311.80-591.78-1.06%
Non-life Insurance 48,364.58-638.06-1.30%
Life Insurance 31,705.86-296.66-0.93%
General Financial 3,169.16-22.10-0.69%
Technology 43,820.73-160.57-0.37%
SHARIAH TOP40 3,808.22-32-0.85%
FTSE/JSE SHARIAH ALL3,933.42-34-0.86%
COAL MINING18,267.90-254-1.37%
FTSE JSE Fledgling 6,281.31-32-0.51%
FTSE/JSE Alt X 1,103.16100.92%
RESOURCE 28,083.40-271-0.96%
DIVIDEND PLUS216.46-2-1.06%
FTSE/JSE RAFI 408,934.30-74-0.82%
Capped Top 4021,310.75-142-0.66%
Capped All Share22,851.71-149-0.65%
JSE TABACO 7,080.42160.23%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
20/11/2013AMESeptember 2013 (Interim)
20/11/2013ATLATSASeptember 2013 (Q)
20/11/2013EHSVSeptember 2013 (Q)
20/11/2013GFIELDSSeptember 2013 (Q)
20/11/2013GFIELDSPSeptember 2013 (Q)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
ESORFRANK18/11/1329/11/1309/12/13ZAR 0.3800
REX TRUE -N-18/11/1306/12/1317/12/13ZAR 0.6100
REX TRUE18/11/1306/12/1317/12/13ZAR 0.6100
NETCARE18/11/1324/01/1403/02/14ZAR 0.4050
AFOVR-N18/11/1306/12/1317/12/13ZAR 0.3500
Ex Div**
Share NameDec-DateLDTPay-DateAmount
B-AFRICA30/07/1315/11/1325/11/13ZAR 7.0800
REDEFINE31/10/1315/11/1325/11/13ZAR 0.3500
DELPROP29/10/1315/11/1325/11/13ZAR 0.3251
SPANJAARD31/10/1315/11/1325/11/13ZAR 0.1500
AFGRI04/09/1315/11/1325/11/13ZAR 0.0330

Upcoming AGMs**
CodeCompany NameDateStatus
NT1Net 1 UEPS Technologies Inc.19/11/2013Confirmed
NT1PNet 1 UEPS Technologies Inc.19/11/2013Confirmed
NT1PPNet 1 UEPS Technologies Inc.19/11/2013Confirmed
RCLRCL Foods Ltd.20/11/2013Confirmed
RBW1RCL Foods Ltd.20/11/2013Confirmed

Stock Exchange News Service
19/11/201317:30AFRICAN LAND INVESTMENTS LIMITED - Changes to dates and times of the African Lan...
19/11/201317:18GLOBAL ASSET MANAGEMENT LTD - Issue of shares for cash, investment into two new ...
19/11/201317:15PRESCIENT LIMITED - Update to shareholders regarding the timetable in respect of...
19/11/201317:09NEDBANK LIMITED - IPB3 - Nedbank Limited Full Capital Redemption
19/11/201317:01JSE LIMITED - Index Change Advice - 20131127 Afrocentric Investment Corp Shares ...
19/11/201317:00KEATON ENERGY HOLDINGS LIMITED - Renewal of Cautionary Announcement
19/11/201317:00SOUTHERN VIEW FINANCE LTD - Abridged PLS re the primary listing of Class B Share...
19/11/201316:34HUGE GROUP LIMITED - Trading Statement
19/11/201316:30ASPEN PHARMACARE HOLDINGS LIMITED - Dealing in securities by Directors and by Di...
19/11/201316:21TORRE INDUSTRIAL HOLDINGS LIMITED - Posting of annual report and notice of annua...
19/11/201316:20TORRE INDUSTRIAL HOLDINGS LIMITED - CANCELLATION OF S338825 Posting of annual re...
19/11/201316:16RCL FOODS LIMITED - Report on proceedings at Annual General Meeting
19/11/201316:15ANGLO AMERICAN PLC - Publication of Final Terms
19/11/201316:10STEFANUTTI STOCKS HOLDINGS LTD - Changes to the board
19/11/201316:00STANDARD BANK GROUP LIMITED - Basel III capital adequacy disclosure at 30 Septem...
19/11/201315:34CORONATION FUND MANAGERS LIMITED - Release of Annual Financial Statements and No...
19/11/201315:32TORRE INDUSTRIAL HOLDINGS LIMITED - Posting of annual report and notice of annua...
19/11/201315:30INVESTEC PLC - Notification of major interest in shares
19/11/201315:15PREFEX CO LIMITED - Results of the meeting of Prefex Securities Holders
19/11/201314:59EMIRA PROPERTY FUND - Full Capital Redemption-EPFC06
19/11/201314:56EMIRA PROPERTY FUND - Interest Rate Reset - EPF001
19/11/201314:41LABAT AFRICA LIMITED - New terms relating to the previously announced proposed d...
19/11/201313:57AFGRI LIMITED - Results of Scheme Meeting
19/11/201313:55SABLE PLATINUM LIMITED - Update to shareholders
19/11/201313:26NEDBANK LIMITED - Dividend Distribution - SPPNIJ
19/11/201313:24NEDBANK LIMITED - Dividend Distribution - SHFNIJ
19/11/201313:04CAXTON CTP PUBLISHERS & PRINTERS LD - Director's Dealing in Securities
19/11/201312:59DRDGOLD LIMITED - Dealings In Securities By Directors And Company Secretary: Acc...
19/11/201312:48ANGLO AMERICAN PLC - Directors / PDMRs interests
19/11/201312:45PSG GROUP LIMITED - Dealing in PSG Group Limited shares by associates of a direc...
19/11/201312:37AFRICAN BANK LIMITED - Interest Rate Reset-ABL09
19/11/201312:31SHOPRITE HOLDINGS LIMITED - Dealings in securities by director of main subsidiar...
19/11/201312:30CORONATION FUND MANAGERS LIMITED - Disclosure of beneficial interests in securit...
19/11/201312:30TREMATON CAPITAL INVESTMENTS LTD - Summary Of The Audited Results For The Year E...
19/11/201312:00SYNTHESIS FUNDING LIMITED - Synthesis Funding Limited - New Financial Instrument...
19/11/201312:00CAFCA LIMITED - Audited Financial Results for the year ended 30 September 2013
19/11/201310:20PPC LIMITED - Presentation of 2013 Financial Results
19/11/201310:05OASIS CRESCENT PROPERTY FUND - Dealing in Oasis Crescent Property Fund Units
19/11/201310:01AFRICAN BANK INVESTMENTS LIMITED - Dealing in securities by a Director
19/11/201310:01ONELOGIX GROUP LIMITED - Results of annual general meeting
19/11/201309:30DEVELOPMENT BANK OF SOUTHERN AFRICA - New Financial Instrument Listing
19/11/201309:06ASCENSION PROPERTIES LIMITED - Cautionary Announcement
19/11/201308:00THE DB X-TRACKER COL INVEST SCHEME - Listing of additional securities - DBXWD
19/11/201307:30KIBO MINING PLC - Update on Exploration Activities at Kibos Rukwa and Imweru Pro...
19/11/201307:15ADCOCK INGRAM HOLDINGS LIMITED - Voluntary trading update and the disclosure of ...
19/11/201307:10BUSINESS CONNEXION GROUP LIMITED - Audited Summarised Consolidated Financial Res...
19/11/201307:05PPC LIMITED - Audited Preliminary Report for the year ended 30 September 2013
19/11/201307:05BRITISH AMERICAN TOBACCO PLC - Transaction in own shares

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