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 The Sharenet Daily 
Tuesday, 05 August 2014 - 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)

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Seed Weekly - Benefits of Global

The Benefits of Global

It still amazes me that there are many investors out there that refuse to invest globally because it hasn’t generated the same level of returns as local markets over the past 20 years or so. As a result they hold their entire portfolio of assets in a geography (South Africa) that represents around 1% - 2% of globally listed assets.

There is an argument that what has outperformed in the past will typically underperform in the future and vice versa. This is generally as a result of shifting valuations rather than the mere out/under performance and makes investment sense. This argument (which many local asset managers subscribe to) currently proposes that investors should invest more globally because valuations are relatively more attractive than locally.

My argument today is that even if global markets were more expensive than the local markets (and thus expected to generate sub standard returns) that it would often make sense to invest a portion of your portfolio globally.

You’ll probably ask, “How can this be so?”

Simply put – diversification!

Below is a chart of the risk and return of a simply constructed balanced portfolio that only invests into locally listed assets (50% equity, 15% property, 20% bonds, 15% cash) as well as the risk and return of global equity and global bonds (all data displayed in ZAR) for the period 31 December 1992 – 30 June 2014.

I can hear the questions, “Why would you add an investment that produces a lower return with a higher level of risk into your portfolio? Surely there can be NO benefit?”

Because these assets have such a different return profile, their inclusion improves the risk/return payoff profile for investors. By simply allocating 25% to global assets (split equally between Global Equity and Global Bonds) investors would still have generated in excess of 95% of the return of the local only portfolio with downside deviation (a measure of risk) 25% lower than the local only portfolio. The chart below shows how investors would take a marginal reduction in return for a material reduction in risk.

A key reason that the balanced portfolio with 25% global does better on a risk adjusted basis is that it is much better at protecting assets in times of market stress. This is the case as market stress (i.e. falling markets) generally occurs when there is a flight to safety (global bond yields fall, generating capital appreciation in hard currency) and the rand weakens (foreign currency assets translated into rand appreciate).

The chart below shows the different drawdown profiles for the two portfolios. It is evident that the global allocation contributed at exactly the time investors require – in times of market stress in the Emerging Market Crisis of 1998 (max drawdown of 17% vs 28% for local only) and the Global Financial Crisis in 2007/8.

In the investment world there are very few ‘free lunches’ but well thought out diversification is one of the surest ways to make your investment portfolio more robust. Naturally we look to optimise the risk and return payoff within our funds and don’t blindly allocate client investments to any uncorrelated asset class, but this simple illustration shows that even an uninformed investor can improve their portfolio by making the correct strategic asset allocation.

From this analysis it would therefore make sense that where our mandate allows we’d make an allocation to global assets even when their valuations aren’t looking that attractive. Naturally if this were the case (i.e. local assets showing much more value) then the allocation to global assets would be relatively small, but the benefits to a portfolio of even a small allocation to global assets shouldn’t be underestimated.

Seed Funds currently have close to maximum allocation to global assets as a result of the relative valuation being shown outside of South Africa’s borders.

Take care,

Mike Browne

021 914 4966

Tue, 05 Aug 2014
Top News
South African stocks edged up on Tuesday as a weak rand lifted shares of companies that generate most of their revenue in foreign currencies such as British American Tobacco and Richemont.  Full story

South Africa's rand weakened by almost 1 percent against dollar on Tuesday, threatening to break out of a recent range after the release of weak Purchasing Managers Index (PMI) numbers for July.  Full story
Israel withdrew ground forces from the Gaza Strip on Tuesday and started a 72-hour ceasefire with Hamas mediated by Egypt as a first step towards negotiations on a more enduring end to the month-old war.  Full story
Palestinian Foreign Minister Riad al-Malki said there was "clear evidence" of war crimes by Israel during its offensive in Gaza as he met International Criminal Court prosecutors on Tuesday to push for an investigation.  Full story
China is investigating a Canadian couple who ran a coffee shop on the Chinese border with North Korea for suspected theft of military and intelligence information and for threatening national security, China's Foreign Ministry said on Tuesday.  Full story
The U.S. dollar strengthened and bond yields rose on Tuesday after strong data on factory orders and service-sector growth, while European shares posted. . .  Full story
European shares gained ground on Tuesday in a tentative rebound following last week's sharp sell-off, supported by forecast-beating results from blue-chips including Deutsche Post.. . .  Full story
Britain's top equity index eked out a gain on Tuesday, as speculation about a takeover lifted engineering group Weir and a broker. . .  Full story
U.S. stocks fell on Tuesday, weighed by earnings such as Target's and a drop in energy shares, but indexes cut losses after strong. . .  Full story

Gold prices edged lower on Tuesday as the dollar hit a new multi-month high after economic data showed the pace of growth in. . .  Full story
U.S. stocks opened lower on Tuesday, weighed by earnings including those of Target and concerns over the health of the Chinese economy after. . .  Full story
Hong Kong shares finished slightly higher on Tuesday, as strong gains from index heavyweights HSBC and Tencent outweighed weakness at Chinese banks and energy. . .  Full story
China shares slipped off nearly eight-month highs on Tuesday, after a survey showed the country's services sector slowly sharply in July to its. . .  Full story
SA Business
South Africa's No.2 drugmaker Adcock Ingram will post a loss in the first nine-months of its fiscal year, it said on Tuesday, a sign a turnaround plan led by top investor. . .  Full story
Privatising South African power utility Eskom [ESCJ.UL] would be a "grave mistake", a minister said on Tuesday, denying media reports that President Jacob Zuma's cabinet was leaning towards a partial sell-off.. . .  Full story
African leaders urged the United States on Monday to renew a trade benefits program giving duty-free access to billions of dollars of African exports for 15 years, saying it would help. . .  Full story

U.S. companies pledged new investment in Africa on Tuesday as part of $14 billion in construction, clean energy, banking, and information technology projects to. . .  Full story
South African private schools firm Curro Holdings Ltd will meet its target of running 40 academies by year end, five years. . .  Full story
Pan African lender Ecobank Transnational has made progress in resolving governance problems, the chief executive of its alliance partner Nedbank Group,. . .  Full story
South Africa's Royal Bafokeng Platinum said on Tuesday interim headline earnings had risen by a third as weakness in the. . .  Full story

Nedbank Group, the South African bank majority owned by insurer Old Mutual Plc, reported a 16 percent jump in first-half profit on Tuesday, buoyed by a drop in bad debts and stronger earnings from lending.. . .  Full story
German industrial services and construction group Bilfinger SE said Chief Executive Roland Koch would quit, taking responsibility for a second cut in its 2014 earnings outlook since end-June.. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0051349.11109.550.21%
JSE Top 4017:0046110.16111.570.24%
JSE Gold17:001487.61-4.74-0.32%
JSE Financial17:0038120.9765.560.17%
JSE Industrial17:0066772.39317.240.48%
JSE Indust 2517:0058929.50314.150.54%
JSE Resource17:0059033.60-172.06-0.29%
DJ Futures19:0216405.00-81.00-0.49%
DJ Ind19:5816412.63-156.65-0.95%
SP 50019:581918.95-20.04-1.03%
FTSE 10017:356682.484.960.07%
All Ords08:395511.50-21.80-0.39%
NZSE 5007:485104.1613.470.26%
NameTimeRPMove% Move
Gold $19:591289.07.860.07%
Gold R19:5913865.21146.301.07%
Gold R/kg19:5844561937720.85%
Silver $19:5919.8560-.2960-1.47%
Platinum $19:581450.25-6.50-0.45%
Palladium $19:58845.50-8.25-0.97%
Brent Crude19:58104.45-.39-0.37%
Rand / Dollar19:5910.75690.10641.00%
Rand / Pound19:5518.12040.19611.09%
Rand / Euro19:5514.37640.08110.57%
Rand / NZD19:599.10290.02090.23%
Rand / AUD19:5510.00270.06020.61%
Yen / Dollar19:59102.56800.02100.02%
Euro / Dollar19:580.74820.00310.42%
Dollar / Euro19:581.3365-0.0057-0.42%
Pound / Dollar19:550.5923-0.0006-0.10%

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 OANDO  207147.25.%5500
2 CAMAC  750507.14.%5000
3 TRNPACO  18751106.23.%670
4 ALTRON  26001385.61.%11918
5 ONELOGIX  420225.51.%535559
6 ARCMITTAL  38091895.22.%910786
7 MMG  1550755.08.%14996
8 CONVERGE  12565.04.%10539
9 HOSP-A  1800764.41.%34057
10 CURRO  26001004.00.%232327
11 HUDACO  94463463.80.%18948
12 DELTAINT  2195803.78.%1082
13 ILIAD  748263.60.%120305
14 WESIZWE  12043.45.%399178
15 CIL  30991003.33.%114805
16 ADVTECH  790253.27.%382884
17 TELKOM  53651603.08.%5286683
18 EASTPLATS  985272.82.%1546
19 PALLINGHT  445122.77.%401727
20 SYCOM  2800752.75.%7953

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Major Moves Down
SharenameSaleMove% MoveVolume
1 MASONITE  2811-379-11.88.%2086
2 SEARDEL  176-17-8.81.%7742
3 ROCKWELL  420-25-5.62.%2000
4 DRDGOLD  286-15-4.98.%347927
5 AFRIMAT  1542-58-3.62.%43346
6 FAIRVEST  135-5-3.57.%2747910
7 COMAIR  425-15-3.41.%22344
8 INTEWASTE  145-5-3.33.%24700
9 DIGICOR  206-7-3.29.%8538
10 KUMBAIO  36247-1136-3.04.%408128
11 CONDUIT  160-5-3.03.%160386
12 PIKWIK  2450-75-2.97.%149909
13 ROLFES  360-10-2.70.%116403
14 TELEMASTR  112-3-2.61.%10527
15 BRIMST-N  1500-40-2.60.%29879
16 BUILDMX  240-6-2.44.%25990
17 RCL  1619-40-2.41.%282800
18 ELLIES   245-6-2.39.%3450848
19 AQUARIUS  429-10-2.28.%815631
20 CSG  215-5-2.27.%81160

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New Highs
SharenameSaleHighMove% MoveVolume
1 HOSP-A  18001924764.41.%34057
2 CIL  309931901003.33.%114805
3 TELKOM  536556571603.08.%5286683
4 AMECOR  32532651.56.%39328
5 NASPERSN  14000014140020001.45.%827796
6 ARB  7387550.8651
7 RMBH  57305806-17-0.30.%1380913
8 MRPRICE  2050020798-100-0.49.%1049039
9 FIRSTRAND  44234514-35-0.79.%14663476

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New Lows
SharenameSaleLowMove% MoveVolume
1 ELLIES   245233-6-2.39.%3450848
2 ADCOCK  52105000-20-0.38.%1862453

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Index Summary
Index NameRPMove% Move
Top 4046,110.16111.570.24%
Mid Cap66,254.45-16.91-0.03%
Small Cap54,949.32277.150.51%
Resource 2059,033.60-172.06-0.29%
Industrial 2558,929.50314.150.54%
Financial 1514,661.9119.580.13%
Financial & Ind. 3062,852.20296.050.47%
All Share51,349.11109.550.21%
Oil & Gas 46,306.02-693.94-1.48%
Mining 35,084.91-4.84-0.01%
Gold Mining1,487.61-4.74-0.32%
Platinum Mining46.46-.29-0.62%
GENERAL MINING10,330.299.270.09%
Oil & Gas Producers 24,897.89-373.12-1.48%
Basic Materials 30,931.92-6.15-0.02%
Chemicals 24,500.89148.270.61%
Forestry & Paper 32,200.7211.860.04%
Industrial Metals 20,313.41-264.57-1.29%
Industrials 46,615.15-115.39-0.25%
General Industrials 149.27-.58-0.39%
Consumer Goods 59,936.16712.501.20%
Automobiles & Parts 8,349.06-52.08-0.62%
Household Goods370.5910.15%
Health Care 85,221.45-620.92-0.72%
Beverages 195.852.811.46%
Index NameRPMove% Move
Food Producers 79,415.71-453.99-0.57%
Personal Goods 1,016.8414.781.47%
Consumer Services 13,086.3078.380.60%
General Retailers 68,931.74-433.90-0.63%
Travel & Leisure 5,731.6210.820.19%
Media 305.494.341.44%
Support Services 2,751.84-15.92-0.58%
Telecommunications 10,522.84-73.78-0.70%
Financials 38,120.9765.560.17%
Banks 68,240.59-167.81-0.25%
Non-life Insurance 49,768.30-893.28-1.76%
Life Insurance 35,684.45235.720.66%
General Financial 3,813.52-.49-0.01%
Technology 46,127.8710.350.02%
SHARIAH TOP40 4,336.02-17-0.40%
FTSE/JSE SHARIAH ALL4,472.45-13-0.28%
COAL MINING18,293.89-29-0.16%
FTSE JSE Fledgling 6,862.31150.22%
FTSE/JSE Alt X 1,231.4600.02%
RESOURCE 32,173.22-94-0.29%
DIVIDEND PLUS228.40-1-0.45%
FTSE/JSE RAFI 4010,137.70-7-0.07%
Capped Top 4024,417.95540.22%
Capped All Share25,998.73550.21%
JSE TABACO 7,969.921291.65%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
06/08/2014ANGLDJune 2014 (Interim)
06/08/2014ANGLD-AJune 2014 (Interim)
06/08/2014ANGLD-BJune 2014 (Interim)
06/08/2014ANGLD-EJune 2014 (Interim)
06/08/2014NEDBANK-PJune 2014 (Interim)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
IMPL CONV04/08/1408/08/1421/08/14ZAR 250.0000
CAPCO01/08/1429/08/1426/09/14GBP 0.0050
INTUPLC31/07/1417/10/1425/11/14GBP 0.0460
SIBANYE31/07/1415/08/1425/08/14ZAR 0.5000
B-AFRICA30/07/1405/09/1415/09/14ZAR 4.0000
Ex Div**
Share NameDec-DateLDTPay-DateAmount
PERGRIN11/06/1401/08/1411/08/14ZAR 1.0000
SABMILLER22/05/1401/08/1415/08/14USD 0.8000
ANGLO25/07/1401/08/1418/09/14USD 0.3200

Upcoming AGMs**
CodeCompany NameDateStatus
PCTPrescient Ltd.05/08/2014Confirmed
ADRAdcorp Holdings Ltd.06/08/2014Confirmed
AFTAfrimat Ltd.06/08/2014Confirmed
IAPInvestec Australia Property Fund06/08/2014Confirmed
TSXTrans Hex Group Ltd.07/08/2014Confirmed

Stock Exchange News Service
05/08/201417:23HUGE GROUP LIMITED - Postponement of Salient Dates in respect of the Huge Rights...
05/08/201417:07ASTRAL FOODS LIMITED - Disclosure of Beneficial Interests in Securities
05/08/201417:00PSV HOLDINGS LIMITED - Renewal of Cautionary Announcement and Trading Statement
05/08/201416:45KUMBA IRON ORE LIMITED - Acceptance of rights to participate in Share Incentive ...
05/08/201416:35RESILIENT PROPERTY INCOME FUND LTD - Change to the company secretary
05/08/201416:30ADCOCK INGRAM HOLDINGS LIMITED - Trading Statement
05/08/201416:25BAYPORT SECURITISATION (RF) LTD - Standard & Poors Rating Affirmation
05/08/201416:23MINE RESTORATION INVESTMENTS LTD - Change in Designated Advisor
05/08/201416:14STRATCORP LIMITED - Changes to the board
05/08/201416:10OLD MUTUAL PLC - Public Opening Position Disclosure/Dealing Disclosure by a Pers...
05/08/201416:06SABLE METALS & MINERAL LTD - Update in respect of the specific issue of shares f...
05/08/201416:00IMPERIAL HOLDINGS LIMITED - Disclosure of Significant Holding in Imperial Ordina...
05/08/201416:00ACCENTUATE LIMITED - Appointment to the Board of Directors
05/08/201415:30AFRICA ETF ISSUER LTD (RF) - Listing of Additional AfricaPalladium debentures - ...
05/08/201415:15RBA HOLDINGS LIMITED - Further cautionary announcement re financial effects
05/08/201415:00GOGLOBAL PROPERTIES LIMITED - Net asset value and dividend update
05/08/201414:48NORTHAM PLATINUM LIMITED - Trading statement
05/08/201414:47TSOGO SUN HOLDINGS LIMITED - Results of General Meeting
05/08/201414:46PRESCIENT LIMITED - Results Of The Annual General Meeting Of Prescient Sharehold...
05/08/201414:43INDWA INVESTMENTS LIMITED - INA445-New Instrument Listing
05/08/201414:35ONELOGIX GROUP LIMITED - Trading statement
05/08/201414:30BRITISH AMERICAN TOBACCO PLC - Notification Of Transactions By Directors, Person...
05/08/201414:30BIDVESTCO LIMITED - BIDC41-New Instrument Listing
05/08/201414:04RESILIENT PROPERTY INCOME FUND LTD - Tax treatment of dividend
05/08/201414:03RESILIENT PROPERTY INCOME FUND LTD - Preliminary summarised audited consolidated...
05/08/201413:54TIGER BRANDS LIMITED - Quarterly results for Dangote Flour Mills Plc (DFM) for t...
05/08/201412:55DIPULA INCOME FUND LIMITED - Disposal of certain non-core properties
05/08/201412:30LIBERTY HOLDINGS LIMITED - Liberty Holdings acquires the remaining shares in Lib...
05/08/201412:16COMBINED MOTOR HOLDINGS LIMITED - Dealing in securities by a director
05/08/201411:20LONMIN PLC - Directors Dealings
05/08/201411:18DELTA PROPERTY FUND LIMITED - New Financial Instrument Listing - DLTC07
05/08/201411:17ANGLO AMERICAN PLC - Directors'/PDMR's interests
05/08/201411:11IVUZI INVESTMENTS LIMITED - IVA432-Full Capital Redemption
05/08/201411:04BIDVESTCO LIMITED - BID01-Full Capital Redemption
05/08/201411:01REPUBLIC OF SOUTH AFRICA - Non - Competitive auction option increase to 100 per ...
05/08/201410:47EQUITES PROPERTY FUND LIMITED - Correction Announcement: Dealings in securities ...
05/08/201410:30SABMILLER PLC - Altria Financial Disclosure
05/08/201410:28ABSA BANK LIMITED - ACL118 and ACL120-Interest Rate Reset
05/08/201410:19PRESCIENT LIMITED - Directors Dealings In Securities By A Director Of A Major Su...
05/08/201410:17ASTRAPAK LIMITED - No change statement and notice of annual general meeting
05/08/201410:16RCL FOODS LIMITED - Trading statement
05/08/201409:58CITY LODGE HOTELS LIMITED - Trading Statement
05/08/201409:57STANDARD BANK OF SOUTH AFRICA LD - SCIB: The Standard Bank Of South Africa Limit...
05/08/201409:52STANDARD BANK OF SOUTH AFRICA LD - SCIB: The Standard Bank Of South Africa Limit...
05/08/201409:46PREMIUM PROPERTIES LIMITED - New Financial Instrument Listing - PMM14
05/08/201408:45GRINDROD INDEX TRACKER MAN RF PTY LTD - Listing of 200 000 additional Preftrax S...
05/08/201408:45BLACKSTAR GROUP SE - Disclosure of acquisition of securities
05/08/201408:02OLD MUTUAL PLC - Nedbank Group Limited Interim Results 2014
05/08/201408:01NEDBANK LIMITED1 - Reviewed Condensed Consolidated Interim Financial Results fo...
05/08/201408:00NEDBANK GROUP LIMITED - Reviewed Condensed Consolidated Financial Results for th...
05/08/201408:00REDEFINE INTERNATIONAL PLC - Completion of hotel portfolio acquisitions and refi...
05/08/201408:00ROYAL BAFOKENG PLATINUM LIMITED - Condensed consolidated interim results for the...
05/08/201407:25BUSINESS CONNEXION GROUP LIMITED - BCX; TKG - Amendments to the Implementation A...
05/08/201407:05CURRO HOLDINGS LIMITED - Unaudited interim results for the 6 months ended 30 Jun...
05/08/201407:05STEINHOFF INTERNATIONAL HOLDINGS LTD - Change In Shareholding Notification, As R...

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