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 The Sharenet Daily 
Wednesday, 10 September 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 - A brief overview of South African government debt

When any government spends more on its various departments (such as general public services, health, education, infrastructure etc.) than it receives by way of its taxes, they need to borrow the difference by way of issuing bonds in various forms.

Because the South African government has a long history of running fiscal deficits, it has developed a sophisticated treasury operation which is responsible for the debt management for government amongst other things.

Treasury released its 2013/14 Debt Management Report last month. If one looks at the size of the South African economy, it is approximately R3,5 trillion. The second quarter reflected the economy growing by only 0,6% quarter on quarter (annualized), after declining by the same percentage in the first quarter.

Against this backdrop, the government’s total outstanding debt continues to climb and in the latest report it now stands on a net basis (i.e. after reducing for cash balances) at R1,4 trillion. This level of debt as a percentage of the economy’s GDP is therefore 39,8%. Government was originally budgeting 39% at March 2014.

Because the government’s medium term estimate over the next 3 years is for expenditure to exceed tax revenues by around R430 billion, the only way that this shortfall can be met is for government to borrow more money in the debt market. But just who does it borrow these funds from?

The chart below reflects the various types of lenders that have lent money to the South African government and the change in their ownership from 2008. Seven years ago non-residents owned just 12,8% of all issued government debt. Now they own over 37% of total issued debt.

Holders of government bonds 2008 – March 2014

Local pension funds owned 44% in 2008 but greater foreign participation over these last few years has diluted pension funds to the second biggest holder of debt. The increase in foreign ownership has largely been due to the search for higher yields post the global financial crisis.
Fortunately the local government has very little foreign issued debt. Net of foreign cash holdings it is just R59 billion and just 4% of total net debt.

Naturally as the level of debt increases, as the rand weakens and as interest rates potentially move up as lenders require a greater return for the increased risk, the interest burden on total outstanding debt escalates. Currently the government is spending around R101 billion per annum or 9,6% of government expenditure.

As investors we need to make an assessment of the risk versus potential return of allocating capital to government bonds. Lending capital to a government may be lower risk than lending capital to a company because a government generally has greater ability to borrow and so repay its debt, but it is never risk free. Furthermore globally we have seen governments default on their debt obligations.

On a cursory “top down” view of the risks in investing into government debt, one may want to consider the following:

1. Increasing foreign ownership of local bonds has been positive, but it can quickly turn negative should global interest rates move up and foreign holders turn net sellers.
2. Ongoing fiscal deficits necessitate additional government borrowing. When seen against a generally stalling economy, the total debt to GDP metrics start to make investors nervous.
3. Love them or hate them, rating agencies still carry weight. The South African government has solicited ratings from four major credit rating agencies. Recently however S&P downgraded their rating to BBB - (one notch above speculative or non-investment grade). Fitch retained their BBB rating but changed their outlook from stable to negative. Moodys is still more optimistic and retains Baa1(negative outlook).
These factors all point to the risk that lenders will demand higher yields as risk increases. With bonds, as the yield increases so prices decline, resulting in capital losses for investors. At Seed we remain generally more cautious of the longer term investment outlook for local bonds.

Kind regards

Ian de Lange

021 914 4966

Wed, 10 Sep 2014
Top News
AngloGold Ashanti led South African stocks lower on Wednesday after the gold producer said it would be splitting its domestic and global operations and seek $2.1 billion in a rights issue.  Full story

Local markets  Full story
President Vladimir Putin said on Wednesday Russia must maintain its nuclear deterrence to counter what he called growing security threats, after Moscow test-launched an intercontinental nuclear missile.  Full story
U.S. Secretary of State John Kerry on Wednesday endorsed Iraqi Prime Minister Haider al-Abadi's plans to mend Baghdad's relations with Sunnis and Kurds, and said Iraq was a partner in the fight against Islamic State militants.  Full story
President Barack Obama called Saudi Arabia's King Abdullah on Wednesday ahead of an evening speech in which the U.S. leader plans to lay out his strategy for defeating the militant group Islamic State, the White House said.  Full story
U.S. stocks were higher on Wednesday, with shares erasing early losses on the back of strength in technology shares, which offset continued weakness in. . .  Full story
European stocks ended flat on Wednesday, as worries over Scotland's vote on independence and growing expectations of a more hawkish stance from the. . .  Full story
Gold fell 0.7 percent on Wednesday, trading near its lowest in seven months at just over $1,240 an ounce, pulled down by fears. . .  Full story
Britain's top equity index made little progress on Wednesday as a fall in the shares of chipmaker ARM and uncertainty over Scotland's independence vote. . .  Full story

U.S. stock prices fell on Wednesday on growing bets the Federal Reserve may raise interest rates faster than previously thought, while anxiety over. . .  Full story
U.S. stocks opened little changed on Wednesday, with investors finding few incentives to jump back into the market even after a recent string. . .  Full story
Hong Kong shares had their biggest fall in more than seven months on Wednesday, as concerns that the Federal Reserve could raise interest. . .  Full story
Hong Kong's benchmark Hang Seng Index fell 2 percent in afternoon trade on Wednesday, as concerns that the Federal Reserve could raise interest. . .  Full story
SA Business
Africa's biggest bullion producer AngloGold Ashanti has joined the wave of large miners shaking up their businesses by announcing a $2.1 billion rights issue and plans to spin off its non-South African assets in a new British-based company.. . .  Full story
Zimbabwe has had to "cough up" $180 million in Chinese loan repayments or face losing its credit line, its finance minister said on Wednesday, in a sign Beijing is tightening its lending terms and expects debtors to be more accountable.. . .  Full story

South African conglomerate Bidvest on Wednesday appointed Barclays and Investec as advisers for a possible listing of its food business on the London Stock. . .  Full story
Aspen Pharmacare is to sell the rights to market a blood clot drug in the United States to rival Mylan Inc for. . .  Full story
Aspen Pharmacare, Africa's biggest drugmaker by value, missed forecasts with an almost one-third rise in full-year profit on Wednesday as a. . .  Full story
East Africa's Rift Valley Railways, operator of the only rail line linking Kenya's Indian Ocean coast with Uganda, said on Wednesday. . .  Full story

The rand hit its weakest level in seven months against the U.S. dollar on Wednesday as the greenback gained over major currencies and investors continued to dwell on South Africa's wider current account deficit.. . .  Full story
World no.2 iron ore miner Rio Tinto expects other miners worldwide to cut 125 million tonnes of iron ore capacity in 2014, roughly equal to the amount of new supply expected to come on stream from Australia and Brazil.. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:1051263.48-443.77-0.86%
JSE Top 4017:1045879.83-464.19-1.00%
JSE Gold17:101336.91-101.21-7.04%
JSE Financial17:0038565.91-74.23-0.19%
JSE Industrial17:0068405.71-606.08-0.88%
JSE Indust 2517:0060356.23-606.25-0.99%
JSE Resource17:1055150.50-804.48-1.44%
DJ Futures19:4217065.0034.000.20%
DJ Ind19:5817068.5554.680.32%
SP 50019:581994.235.790.29%
FTSE 10017:356830.111.110.02%
All Ords08:415574.40-33.80-0.60%
NZSE 5007:485236.66-7.04-0.13%
NameTimeRPMove% Move
Gold $19:581246.09-9.07-0.72%
Gold R19:5813632.47-60.70-0.44%
Gold R/kg19:58438248-2897-0.66%
Silver $19:5818.9300-.1040-0.55%
Platinum $19:581374.10-9.55-0.69%
Palladium $19:58848.00-8.50-0.99%
Brent Crude19:5898.14-1.02-1.03%
Rand / Dollar19:5810.94020.03000.27%
Rand / Pound19:5517.66890.12070.69%
Rand / Euro19:5514.1187-0.0048-0.03%
Rand / NZD19:589.01690.01660.18%
Rand / AUD19:5510.0232-0.0268-0.27%
Yen / Dollar19:57106.77700.57300.54%
Euro / Dollar19:550.77480.00190.25%
Dollar / Euro19:571.2905-0.0034-0.26%
Pound / Dollar19:550.6178-0.0029-0.47%

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The JSE Today

Trading Statistics
* Includes all listed instruments on the JSE
Major Moves Up
SharenameSaleMove% MoveVolume
1 SILVERB  1281816.36.%287131
2 BUILDMX  165149.27.%5523
3 DIAMONDCP  11165.71.%500
4 ASPEN  3390016004.95.%1513454
5 HOLDSPORT  42001654.09.%26124
6 CONVERGE  255104.08.%1360975
7 OCTODEC  2279894.06.%25889
8 HUGE  13553.85.%222262
9 MASTDRILL  1398483.56.%5020
10 RANGOLD  24273.03.%71220
11 MERAFE  13942.96.%950574
12 WESCOAL  18052.86.%36527
13 ADAPTIT  739202.78.%56469
14 A-V-I  66341682.60.%417155
15 SIBANYE  2468612.53.%2577847
16 TRANSCAP  691162.37.%67014
17 TIMES  2000452.30.%2397
18 TELKOM  61571372.28.%1509960
19 ELBGROUP  45001002.27.%600
20 CULLINAN  22552.27.%5000

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Major Moves Down
SharenameSaleMove% MoveVolume
1 CENRAND  150-94-38.52.%34
2 COMPCLEAR  510-190-27.14.%10500
3 ANGGOLD  14398-2468-14.63.%5336369
4 YORK  260-30-10.34.%19677
5 EASTPLATS  820-69-7.76.%850
6 ASSORE  26500-1834-6.47.%169712
7 INTEWASTE  145-9-5.84.%6285
8 NASPERSN  127075-6926-5.17.%2089395
9 FONEWORX  280-15-5.08.%16758
10 PHUMELELA  1800-95-5.01.%168504
11 ELLIES   190-10-5.00.%426958
12 PALLINGHT  466-24-4.90.%164838
13 FORTRESSA  1542-73-4.52.%41960
14 KUMBAIO  28525-1250-4.20.%747300
15 HUDACO  10134-366-3.49.%187430
16 WHLN  1400-50-3.45.%1511634
17 PETMIN  170-6-3.41.%418111
18 ARM   16250-550-3.27.%1655723
19 OANDO  155-5-3.13.%2137
20 METROFILE  480-15-3.03.%64956

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New Highs
SharenameSaleHighMove% MoveVolume
1 ASPEN  339003429916004.95.%1513454
2 CONVERGE  255275104.08.%1360975
3 A-V-I  663466621682.60.%417155
4 MMIHLDGS  28392925351.25.%1951857
5 MRPRICE  21017213422371.14.%700695
6 JSE  10750107991081.01.%234929
7 ZEDER  59860930.50.%1323183
8 OMNIA  2420024700800.33.%262162
9 ROCKCASTL  212022000.78879
10 SUPRGRP  32013229-3-0.09.%338382
11 LIFEHC  47294781-17-0.36.%2293767
12 COMPCLEAR  510705-190-27.14.%10500

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New Lows
SharenameSaleLowMove% MoveVolume
1 YORK  260260-30-10.34.%19677
2 ASSORE  2650026000-1834-6.47.%169712
3 KUMBAIO  2852528051-1250-4.20.%747300
4 ARM   1625016133-550-3.27.%1655723
5 STEFSTOCK  800711-9-1.11.%54445
6 CMH  12008110.21064
7 HOSP-A  15251415251.67.%1108

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Index Summary
Index NameRPMove% Move
Top 4045,879.83-464.19-1.00%
Mid Cap67,311.36-11.62-0.02%
Small Cap55,767.17-343.56-0.61%
Resource 2055,150.50-804.48-1.44%
Industrial 2560,356.23-606.25-0.99%
Financial 1514,880.89-6.87-0.05%
Financial & Ind. 3064,287.32-532.00-0.82%
All Share51,263.48-443.77-0.86%
Oil & Gas 47,523.62-1113.93-2.29%
Mining 32,048.47-356.38-1.10%
Gold Mining1,336.91-101.21-7.04%
Platinum Mining42.07-.07-0.17%
GENERAL MINING9,451.44-40.39-0.43%
Oil & Gas Producers 25,552.58-598.93-2.29%
Basic Materials 28,512.96-286.66-1.00%
Chemicals 24,562.3438.300.16%
Forestry & Paper 32,951.79112.770.34%
Industrial Metals 17,410.11-544.46-3.03%
Industrials 47,934.61-282.87-0.59%
General Industrials 155.95-.75-0.48%
Consumer Goods 61,625.74-264.04-0.43%
Automobiles & Parts 7,687.84-97.98-1.26%
Household Goods361.12-1-0.15%
Health Care 94,766.841723.191.85%
Beverages 207.88-1.14-0.55%
Index NameRPMove% Move
Food Producers 82,604.57590.050.72%
Personal Goods 1,021.93-11.79-1.14%
Consumer Services 12,176.41-389.72-3.10%
General Retailers 66,474.64-84.84-0.13%
Travel & Leisure 5,926.14-23.54-0.40%
Media 277.32-15.04-5.14%
Support Services 2,853.20-48.71-1.68%
Telecommunications 12,253.99-38.61-0.31%
Financials 38,565.91-74.23-0.19%
Banks 66,570.70-55.87-0.08%
Non-life Insurance 54,604.76-778.43-1.41%
Life Insurance 37,086.96-8.05-0.02%
General Financial 3,786.544.670.12%
Technology 46,239.70-201.60-0.43%
SHARIAH TOP40 4,243.98-46-1.08%
FTSE/JSE SHARIAH ALL4,415.52-39-0.87%
COAL MINING18,019.56-386-2.09%
FTSE JSE Fledgling 6,720.88-8-0.12%
FTSE/JSE Alt X 1,332.53-8-0.58%
CAPPED PROPERTY 474.69-0.58%
RESOURCE 30,071.31-411-1.35%
DIVIDEND PLUS227.13-0-0.11%
FTSE/JSE RAFI 4010,083.37-73-0.72%
Capped Top 4024,355.39-254-1.03%
Capped All Share25,975.11-226-0.86%
JSE TABACO 8,162.49800.99%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
11/09/2014LITHAJune 2014 (Interim)
11/09/2014LITHAPJune 2014 (Interim)
11/09/2014PETMINJune 2014 (Final)
11/09/2014RMIHJune 2014 (Final)
11/09/2014SASFINJune 2014 (Final)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
FIRSTRAND09/09/1403/10/1413/10/14ZAR 0.9700
SHFINV-PREF09/09/1417/10/1427/10/14ZAR 3.6500
COMAIR09/09/1410/10/1420/10/14ZAR 0.1300
STEINHOFF09/09/1407/11/1417/11/14ZAR 1.5000
COMPCLEAR09/09/1417/10/1427/10/14ZAR 0.3200
Ex Div**
Share NameDec-DateLDTPay-DateAmount
ABSABANK-P30/07/1405/09/1415/09/14ZAR 31.9747
NEDBANK05/08/1405/09/1415/09/14ZAR 4.6000
B-AFRICA30/07/1405/09/1415/09/14ZAR 4.0000
EXXARO21/08/1405/09/1415/09/14ZAR 2.6000
STANBANK14/08/1405/09/1415/09/14ZAR 2.5900

Upcoming AGMs**
CodeCompany NameDateStatus
SAHSouth African Coal Mining Holdings Ltd.10/09/2014Confirmed
SCLSacOil Holdings Ltd.12/09/2014Confirmed
DTCDatatec Ltd.17/09/2014Confirmed
MIXMiX Telematics Ltd.17/09/2014Confirmed

Stock Exchange News Service
10/09/201417:45MIX TELEMATICS LIMITED - Dealings in securities by directors of major subsidiari...
10/09/201417:41THE BIDVEST GROUP LIMITED - Market Update: Listing of Foodservice Operations
10/09/201417:31BSI STEEL LIMITED - Trading Statement
10/09/201417:15CAPEVIN HOLDINGS LIMITED - Audited summary consolidated results for the year end...
10/09/201417:10EXXARO RESOURCES LIMITED - Dealings by a director of Exxaro in Exxaro shares
10/09/201417:05JSE LIMITED - Index Change Advice - Octodec Acquisition of Premium
10/09/201417:00NEW EUROPE PROPERTY INVESTMENTS PLC - Dealings in securities by an associate of...
10/09/201416:43FORTRESS INCOME FUND LIMITED - FIFC12-New Instrument Listing
10/09/201416:42SOAPSTONE INVESTMENT LTD - DMCCB-Interest Payment Correction
10/09/201416:09IVUZI INVESTMENTS LIMITED - Listing of New Instrument - IVA450
10/09/201415:57NET 1 UEPS TECHNOLOGIES INC - Media Statement
10/09/201415:54ZEDER INVESTMENTS LIMITED - Trading Statement
10/09/201415:31STANDARD BANK OF SOUTH AFRICA LD - SCIB: The Standard Bank Of South Africa Limit...
10/09/201414:45AVI LIMITED - Directors' dealing
10/09/201414:39NEDBANK LIMITED - Dividend Announcement - REINIF
10/09/201414:37NEDBANK LIMITED - Dividend Announcement - FSRNIK
10/09/201414:37NEDBANK LIMITED - Dividend Announcement - FSRNNI
10/09/201414:19TRANSACTION CAPITAL LIMITED - Dealing in securities
10/09/201413:45MUSTEK LIMITED - Director dealing in securities
10/09/201413:45VILLAGE MAIN REEF LIMITED - Reminder Of Salient Dates For Notice Of General Meet...
10/09/201413:35POYNTING HOLDINGS LIMITED - Changes To Management And The Board Of Directors Ap...
10/09/201413:00ASPEN PHARMACARE HOLDINGS LIMITED - Reviewed Provisional Group Financial Results...
10/09/201412:51SOUTH AFRICAN COAL MINING HLDGS LTD - Results of the Annual General Meeting
10/09/201412:48PSG GROUP LIMITED - Joint Announcement - Thembeka Scheme of Arrangement and Spec...
10/09/201412:40GOLIATH GOLD MINING LIMITED - Reviewed Condensed Consolidated Interim Financial ...
10/09/201412:09PLATFIELDS LIMITED - Quarterly update on the suspension of the Company
10/09/201411:35REAL PEOPLE INV HOLDINGS LTD - Moody's downgrades Real People's Long-Term Nation...
10/09/201411:03MURRAY & ROBERTS HOLDINGS LIMITED - Deferral of part of STI into forfeitable sha...
10/09/201411:00SYNTHESIS FUNDING LIMITED - New Financial Instrument Listing - SY1165
10/09/201410:00BNP PARIBAS ARBITRAGE ISSUANCE B.V. - Issue of ZAR25,000,000 warrants relating t...
10/09/201410:00SACOIL HOLDINGS LIMITED - Acquisition of a 100% interest in the Lagia oil field,...
10/09/201409:50SAPPI LIMITED - Dealing in securities by directors of listed companies
10/09/201409:30ROCKCASTLE GLOBAL REAL EST CO LTD - Dispatch of notice of general meeting to Roc...
10/09/201409:24ARCELORMITTAL SOUTH AFRICA LIMITED - Notice of change of financial reporting to ...
10/09/201408:10RMB HOLDINGS LIMITED - Condensed, audited results announcement, cash dividend de...
10/09/201408:00AFRICAN OXYGEN LIMITED - Afrox retains Sasol contract, boosts value
10/09/201408:00ANGLOGOLD ASHANTI LIMITED - Anglogold Ashanti proposes a corporate restructure a...
10/09/201408:00GLENCORE PLC - Transaction in own shares
10/09/201407:42STEINHOFF INTERNATIONAL HOLDINGS LTD - Change in Shareholding Notification
10/09/201407:06MMI HOLDINGS LIMITED - Media realease - MMI Holdings delivers on its promises
10/09/201407:05MMI HOLDINGS LIMITED - Summarised & Audited Group Results for the year ended 30 ...
10/09/201407:05SASFIN HOLDINGS LIMITED - Audited group results and dividend declarations

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