Wednesday, 18 June 2014 - 20:00
Charts
Seed Weekly - African Equity in a Multi Asset Fund
Investing into Africa (for the purposes of this article, Africa refers to Africa ex South Africa) has become fairly popular over the past few years. As is often the case, investors are looking for ‘the next big thing’ and it seems that Africa currently can be classified as a candidate for ‘the next big thing’.
One of the reasons why investing into Africa has become popular for South African managers and investors is the change in legislation that allows Reg 28 funds (funds that can be used in retirement products) to invest an extra 5% into Africa on top of the maximum allowed 25% global allocation. With local markets expensive both on a nominal basis and when looking at various valuation metrics, many managers and investors are looking at where else they can expect to generate decent real returns.
When looking at returns generated from Africa equity it is important not to just look at the relative performance over a certain period. More important than the overall performance, is how it has performed relative to South African and Developed Market equities over various periods – essentially looking at the return profile.
An example of what this means is that while the average correlation of monthly returns between Africa equity and SA equity is 17% over the past 12 months on an annual basis it has been above 80% and as low as -80% as shown in the chart below.
When making an allocation we need to assess whether the correlation will fall back to its long term average of around 17% or lower (which is desirable) or if it will remain high as it has over the shorter term.
Assets that have a low (or negative) correlation that are blended with one another and regularly rebalanced gain the benefits of diversification. By blending the asset classes one is generally able to create a solution that either has a better return (with no extra risk) or lower risk (without sacrificing return) or ideally a combination of both when compared to the stand alone asset class. In the case of blending a typical balanced fund (95%) with Africa equity (5%) one has been able to slightly improve the return when compared to the balanced fund and also reduce the downside deviation over the past 12 years.
When a manager or investor is satisfied that the return profile going forward will be sufficiently uncorrelated the next step in the process is to ensure that the valuations are reasonable. It doesn’t make sense to allocate capital to a grossly overvalued asset (currently developed market bonds can be classed in this category) purely because of the diversification benefits that can be achieved. Each asset should only make its way into a portfolio if it offers the opportunity of positive returns. The valuation of Africa equity currently looks reasonable (especially when compared to SA equity).
Furthermore one needs to assess the relative merits of active and passive management, both in the current environment and in the specific asset class universe. At Seed our opinion is the opportunity offered by active managers in Africa equity (especially those that spend a great deal of time in the various countries) far outweighs the extra costs incurred. Over the past month and a half we have started to make small allocations to Africa equity across our multi asset Funds.
Take care,
Mike Browne
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Wed, 18 Jun 2014
Top News
South African power utility Eskom warned of possible electricity outages on Wednesday and Thursday evening, saying its system was severely constrained.
Eskom has instituted at least three blackouts this year as demand, which peaks at about 36,000 megawatts during evening hours, put Full story |
|
Iran is refusing to significantly cut the number of centrifuges it intends to keep to produce nuclear fuel, making it hard to imagine a compromise at this week's talks with six powers, Western and Iranian officials said on Wednesday. Full storyAfghan presidential candidate Abdullah Abdullah on Wednesday demanded election organisers stop counting ballots because of widespread fraud, potentially derailing what is seen as a make-or-break vote before most foreign troops leave. Full story |
|
|
Markets | European stock markets were
steady on Wednesday, hovering near multi-year highs reached last
week and supported by shares in major energy companies as
violence. . . Full story | | The dollar dipped and Wall
Street equities softened on Wednesday as global markets puzzled
over the odds that Federal Reserve Chair Janet Yellen. . . Full story | | U.S. stocks held near the
unchanged mark on Wednesday, on the heels of a three-day winning
streak for the S&P 500 index and. . . Full story | | Oil companies lifted Britain's
blue chip share index on Wednesday as heavy fighting in Iraq
pushed crude prices towards $114 a barrel.. . . Full story |
|
| Gold steadied on Wednesday
before the conclusion of a U.S. Federal Reserve meeting as
investors watched for any sign on whether the central. . . Full story | | U.S. stocks opened flat on
Wednesday with investors looking ahead to an impending monetary
policy announcement by the Federal Reserve as it concludes. . . Full story | | Britain's top equity index edged
higher in cautious trading early on Wednesday, with a rise in
crude oil prices following heavy fighting in. . . Full story | | Hong Kong shares finished a
choppy session little changed on Wednesday, with turnover
staying low as global markets brace for results from the. . . Full story |
|
SA Business | The shortfall on South Africa's current account unexpectedly narrowed to its smallest since 2012 in the first quarter of the year. . . Full story | | South Africa's economy would have grown 1.6 percent in the first quarter of this year if the direct and indirect effects. . . Full story | | South Africa's headline consumer inflation accelerated more than expected to 6.6 percent year-on-year in May from 6.1 percent in April, Statistics. . . Full story | | South Africa's rand was on shaky ground against the dollar on Wednesday after pushing convincingly through the 10.80 barrier overnight, with. . . Full story |
|
| South Africa's retail sales grew by 1.8 percent year-on-year in April compared with a revised 0.8 percent in March, Statistics South Africa said on Wednesday.. . . Full story | | Spending in South Africa expanded at an annualised 2.7 percent in the first quarter of the year after falling 3.6 percent in the last three months of 2013 as the pace. . . Full story | | South African President Jacob
Zuma put the need to boost the economy at the centre of the
first major policy speech of his second term on Tuesday, saying
he hoped to lift annual growth. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 50693.95 | -217.10 | -0.43% | JSE Top 40 | 17:00 | 45723.15 | -179.10 | -0.39% | JSE Gold | 17:00 | 1399.14 | 1.29 | 0.09% | JSE Financial | 17:00 | 37186.84 | -355.81 | -0.95% | JSE Industrial | 17:00 | 66996.14 | -382.39 | -0.57% | JSE Indust 25 | 17:00 | 59378.63 | -303.76 | -0.51% | JSE Resource | 17:00 | 56719.05 | 149.74 | 0.26% | DJ Futures | 19:12 | 16685.00 | -44.00 | -0.26% | DJ Ind | 19:58 | 16785.22 | -23.27 | -0.14% | SP 500 | 19:58 | 1941.50 | -0.49 | -0.03% | Nasdaq | 19:58 | 4324.78 | -12.45 | -0.29% | FTSE 100 | 17:35 | 6778.56 | 11.79 | 0.17% | DAX | 18:10 | 9930.33 | 10.01 | 0.10% | CAC40 | 18:10 | 4530.37 | -5.70 | -0.13% | Nikkei | 08:28 | 15115.80 | 139.83 | 0.93% | Shanghai | 09:28 | 2055.52 | -11.18 | -0.54% | Hang-Seng | 10:28 | 23181.72 | -21.87 | -0.09% | All Ords | 08:37 | 5363.90 | -16.80 | -0.31% | NZSE 50 | 07:48 | 5184.46 | -9.04 | -0.17% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1271.25 | .01 | 0.00% | Gold R | 19:59 | 13648.27 | -128.34 | -0.93% | Gold R/kg | 19:58 | 439000 | -2560 | -0.58% | Silver $ | 19:59 | 19.7740 | .0390 | 0.20% | Platinum $ | 19:59 | 1446.90 | 10.40 | 0.72% | Palladium $ | 19:59 | 821.80 | 8.10 | 1.00% | R157 | 16:58 | 6.74 | .03 | 0.37% | R186 | 17:26 | 8.44 | -.00 | -0.06% | R204 | 16:56 | 7.63 | .04 | 0.46% | R207 | 16:58 | 7.89 | -.01 | -0.13% | Brent Crude | 19:58 | 114.15 | .93 | 0.82% | Rand / Dollar | 19:59 | 10.7361 | -0.0978 | -0.90% | Rand / Pound | 19:55 | 18.1627 | -0.1864 | -1.02% | Rand / Euro | 19:55 | 14.5742 | -0.1044 | -0.71% | Rand / NZD | 19:59 | 9.3236 | -0.0556 | -0.59% | Rand / AUD | 19:55 | 10.0346 | -0.0862 | -0.85% | Yen / Dollar | 19:59 | 102.1890 | 0.0080 | 0.01% | Euro / Dollar | 19:59 | 0.7366 | -0.0016 | -0.22% | Dollar / Euro | 19:59 | 1.3576 | 0.0024 | 0.18% | Pound / Dollar | 19:55 | 0.5901 | 0.0007 | 0.12% |
|
Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
---|
18/06/2014 | 145 | 209 | 65 | 419 | 192,396,554 | R13,618,732,899 | 161484 | 1585250 | 17/06/2014 | 206 | 153 | 59 | 418 | 206,692,229 | R14,954,819,203 | 191705 | 387892 | 13/06/2014 | 193 | 166 | 67 | 426 | 172,796,699 | R14,730,764,507 | 143409 | 480684 | 12/06/2014 | 169 | 196 | 54 | 419 | 197,064,056 | R15,598,531,084 | 158568 | 99207 | 11/06/2014 | 181 | 190 | 74 | 445 | 232,978,429 | R18,336,559,277 | 190502 | 625388 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 45,723.15 | -179.10 | -0.39% | Industrial | 66,996.14 | -382.39 | -0.57% | Mid Cap | 63,666.26 | -459.75 | -0.72% | Small Cap | 53,919.24 | -94.59 | -0.18% | Resource 20 | 56,719.05 | 149.74 | 0.26% | Industrial 25 | 59,378.63 | -303.76 | -0.51% | Financial 15 | 14,340.07 | -166.19 | -1.15% | Financial & Ind. 30 | 63,105.62 | -413.02 | -0.65% | All Share | 50,693.95 | -217.10 | -0.43% | Oil & Gas | 47,977.67 | -349.62 | -0.72% | Mining | 33,198.77 | 173.48 | 0.53% | Gold Mining | 1,399.14 | 1.29 | 0.09% | Platinum Mining | 48.97 | .18 | 0.37% | GENERAL MINING | 9,662.08 | 57.81 | 0.60% | Oil & Gas Producers | 25,796.71 | -187.98 | -0.72% | Basic Materials | 29,460.56 | 154.54 | 0.53% | Chemicals | 24,865.90 | -71.86 | -0.29% | Forestry & Paper | 33,008.01 | 227.78 | 0.69% | Industrial Metals | 18,541.36 | 166.23 | 0.90% | Industrials | 45,410.96 | -605.02 | -1.31% | General Industrials | 142.69 | -1.80 | -1.25% | Consumer Goods | 63,719.38 | -442.02 | -0.69% | Automobiles & Parts | 8,944.61 | -90.58 | -1.00% | Household Goods | 373.09 | 0 | 0.02% | Health Care | 82,522.34 | -498.55 | -0.60% | Beverages | 211.74 | -2.32 | -1.08% |
| | Index Name | RP | Move | % Move | Food Producers | 76,369.25 | -1642.28 | -2.11% | Personal Goods | 1,108.63 | -.60 | -0.05% | Consumer Services | 11,941.21 | -14.23 | -0.12% | General Retailers | 64,146.55 | -911.22 | -1.40% | Travel & Leisure | 5,794.19 | 19.89 | 0.34% | Media | 271.22 | 1.63 | 0.60% | Support Services | 2,748.86 | -67.52 | -2.40% | Telecommunications | 10,820.48 | -75.98 | -0.70% | Financials | 37,186.84 | -355.81 | -0.95% | Banks | 64,374.85 | -1130.90 | -1.73% | Non-life Insurance | 49,862.74 | -1163.81 | -2.28% | Life Insurance | 35,657.94 | -265.26 | -0.74% | General Financial | 3,789.44 | -22.07 | -0.58% | Technology | 42,773.50 | -96.67 | -0.23% | SHARIAH TOP40 | 4,250.41 | 2 | 0.05% | FTSE/JSE SHARIAH ALL | 4,361.95 | -5 | -0.11% | COAL MINING | 17,793.27 | 32 | 0.18% | FTSE JSE Fledgling | 6,803.13 | -6 | -0.08% | FTSE/JSE Alt X | 1,257.10 | -5 | -0.42% | SA LISTED PROPERTY | 507.13 | | -0.23% | CAPPED PROPERTY | 445.16 | | -0.20% | RESOURCE | 30,986.60 | 84 | 0.27% | DIVIDEND PLUS | 223.76 | -2 | -0.87% | FTSE/JSE RAFI 40 | 10,000.65 | -57 | -0.57% | Capped Top 40 | 24,235.80 | -105 | -0.43% | Capped All Share | 25,677.89 | -114 | -0.44% | JSE TABACO | 8,238.64 | -67 | -0.81% |
|
Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | HSP | HOLDSPORT LIMITED | BUY | 10/06/2014 | NED | NEDBANK GROUP LTD | BUY | 10/06/2014 | BVT | THE BIDVEST GROUP LIMITED | BUY | 10/06/2014 | ANG | ANGLOGOLD ASHANTI LIMITED | BUY | 10/06/2014 | BGA | BARCLAYS AFRICA GRP LTD | HOLD | 10/06/2014 |
|
|
Results Expected** Expected | Company Name | Fin. Date | 20/06/2014 | AMECOR | March 2014 (Final) | 24/06/2014 | WESCOAL | March 2014 (Final) | 25/06/2014 | NASPERS | March 2014 (Final) | 25/06/2014 | NASPERS-N | March 2014 (Final) | 25/06/2014 | OMNIA | March 2014 (Final) |
|
Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | INVICTA | 17/06/14 | 04/07/14 | 14/07/14 | ZAR 1.8465 | TELEMASTR | 17/06/14 | 04/07/14 | 14/07/14 | ZAR 0.0100 | MICROMEGA | 12/06/14 | 27/06/14 | 07/07/14 | ZAR 0.2000 | AF-OVR 6%PP | 12/06/14 | 27/06/14 | 07/07/14 | ZAR 0.0600 | SYCOM | 12/06/14 | 20/06/14 | 30/06/14 | ZAR 0.9516 |
|
|
Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | BRAIT PREF | 29/05/14 | 12/06/14 | 23/06/14 | ZAR 4.4934 | MRPRICE | 27/05/14 | 12/06/14 | 23/06/14 | ZAR 3.1400 | TONGAAT | 26/05/14 | 12/06/14 | 26/06/14 | ZAR 2.1000 | ASTRAL | 19/05/14 | 12/06/14 | 23/06/14 | ZAR 2.0000 | REUNERT | 20/05/14 | 12/06/14 | 23/06/14 | ZAR 0.9500 |
|
Upcoming AGMs** Code | Company Name | Date | Status | GGM | Goliath Gold Mining Ltd. | 19/06/2014 | Confirmed | PSG | PSG Group Ltd. | 20/06/2014 | Confirmed | PGFP | PSG Group Ltd. | 20/06/2014 | Confirmed | ZED | Zeder Investments Ltd. | 20/06/2014 | Confirmed | ZEDP | Zeder Investments Ltd. | 20/06/2014 | Confirmed |
|
|
Stock Exchange News Service Click here for more SENS news
|