Tuesday, 17 February 2015 - 20:00
Charts
Seed Weekly - Investing Offshore
When the rand weakens to levels not seen for years, like it has over the past few months, clients/investors often start to ask whether they should send more of their hard earned investments offshore, to protect from further weakness. This is especially true if backed by political turbulence (as experienced last week). The chart below shows the ZAR/USD exchange rate over the past 30 years, we are now near the lows of 2001.
It is interesting to note that despite the continued rand weakness since mid 2011 the rand is still some way off, when adjusting the currency for the difference in inflation between South Africa and the US, to the levels that we saw in 2001 and 2008.
Economic theory dictates that a currency should depreciate relative to another currency if the country experiences higher inflation, known as Purchasing Power Parity, in order for it to remain at ‘fair value’. As South Africa has higher inflation than the US, it is normal for the currency to gradually weaken versus the USD over time. The chart below shows the ZAR vs the USD and the fair value exchange rate over the past 30 years. Note that we are currently on the cusp of being 1 standard deviation away from fair value, compared to 2001 and 2008 when we exceeded this level.
At the height of the currency panic, ending in 2001, many investors took their capital offshore and invested into developed equities. This, on the basis that developed market stock exchanges (the US in particular) had done extremely well in the 90’s and also that the rand was a ‘one way bet’. It is scary to note that some 13 years later an investor that made this decision has still not recouped their capital in real terms (inflation adjusted), is some way off cash returns and has been left in the dust when compared to local equity (all adjusted for currency movements). The chart below shows the performance of various assets over this period.
It is always best for investors to remain rational and invest looking forward, rather than based on what’s happened in the rear view mirror. In this regard Seed, and most South African asset managers, have been overweight global assets for the last few years to take advantage of the possibility of the currency moving from a strong to weak level, based partially on the fact that the rand was relatively too strong.
It is important to note that we are unable to predict the future, and therefore spend little time looking into crystal balls. We rather spend our time looking at valuations and assessing probabilities of investment outcomes based on the current information at hand. We then build diversified portfolios that are able to withstand the eventuality of multiple scenarios. It is also important to note that there are differences when compared to the end of 2001, mainly that global equities currently offer much better prospects of returns, due to better valuations when compared to the height of the Tech Bubble.
Seed Funds remain overweight global assets, but we are close to the point where the risks of significant currency strengthening outweigh the risks of a currency blow out. As/if we reach this point our Funds will be incrementally adjusted to take advantage of the opportunity presented (i.e. repatriating investments, or hedging out currency exposure). We believe that investing is a probability vocation; in this regard we continually seek to get the odds in our favour and size our investments appropriately.
Take care,
Mike Browne
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 17 Feb 2015
Top News
South Africa's rand firmed to its strongest level in seven days on Tuesday as the dollar slipped and hopes of a compromise preventing Greece's exit from the eurozone were dashed. Full story
Local markets
There were losses across the board on the JSE today, led by gold mining shares which tumbled 4.25%, with the All Share falling 0.31%. Full story |
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Pro-Russian rebels and government forces fought street-to-street in a strategic town in east Ukraine on Tuesday and refused to pull back their heavy guns, all but scuppering hopes that a European-brokered peace deal will end months of conflict. Full storyA Taliban suicide bomber on Tuesday killed six people and himself in a brazen attack on police headquarters in Pakistan's eastern city of Lahore, in what militants called a revenge bid for the recent hangings of colleagues. Full storyKurdish militants demanded concrete steps from Turkey to advance a fragile peace process on Tuesday, accusing the ruling AK Party of stalling and warning that the negotiations could break down. Full story |
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Markets | The euro recovered from initial
losses and gold fell to one-month lows on Tuesday on signs Greek
banks will continue to get emergency. . . Full story | | Gold and silver fell to six-week
lows on signs that Greek banks will continue to get emergency
funding despite a breakdown in debt. . . Full story | | Hong Kong's main stock index rose for the
fourth day in a row on Tuesday, taking cues from mainland
shares, but volume. . . Full story | | China shares rose to three-week
highs on Tuesday, underpinned by gains in property firms after
data showed some signs that housing prices were. . . Full story |
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| Japan's Nikkei share average fell
on Tuesday, retreating from a near eight-year high after talks
between Greece and euro zone finance ministers on. . . Full story | | Australian shares declined on
Tuesday after one of the country's big banks disappointed
investors with its earnings result, cooling a red-hot sector
that helped. . . Full story | | Global shares hit their highest
since September and the euro firmed on Monday with investors
cautiously optimistic that euro zone finance ministers would
reach. . . Full story | | Gold rose for a third straight
session on Monday, due to a weaker dollar as a meeting of euro
zone finance ministers on. . . Full story |
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SA Business | South Africa plans to improve its pipelines and ports to allow for more gas imports for use in power generation, the acting director general of the department of energy said on. . . Full story | | The Zimbabwe Stock Exchange (ZSE) has suspended the trading of shares in Zimbabwe's hotel group Meikles Africa to allow an investigation on whether the firm overstated a debt it is owed. . . Full story | | South Africa's biggest construction firm, Aveng Ltd, reported a drop in half-year profit on Tuesday, hit by a slowdown in public building projects and spending in the mining sector as well. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 52833.48 | -162.41 | -0.31% | JSE Top 40 | 17:00 | 46714.30 | -108.14 | -0.23% | JSE Gold | 17:00 | 1400.50 | -62.12 | -4.25% | JSE Financial | 17:00 | 43674.23 | -193.77 | -0.44% | JSE Industrial | 17:00 | 73677.39 | -96.29 | -0.13% | JSE Indust 25 | 17:00 | 65283.61 | -99.69 | -0.15% | JSE Resource | 17:00 | 46160.02 | -250.94 | -0.54% | DJ Futures | 19:52 | 17990.00 | 45.00 | 0.25% | DJ Ind | 19:58 | 18018.15 | -1.20 | -0.01% | SP 500 | 19:58 | 2096.78 | -0.21 | -0.01% | Nasdaq | 19:58 | 4892.61 | -1.23 | -0.03% | FTSE 100 | 18:28 | 6892.06 | 35.01 | 0.51% | DAX | 19:08 | 10895.62 | -27.61 | -0.25% | CAC40 | 19:08 | 4753.99 | 2.04 | 0.04% | Nikkei | 08:30 | 17987.09 | -17.68 | -0.10% | Shanghai | 09:28 | 3246.91 | 24.55 | 0.76% | Hang-Seng | 06:28 | 24820.38 | 85.13 | 0.34% | All Ords | 07:38 | 5822.30 | -27.20 | -0.46% | NZSE 50 | 06:48 | 5750.21 | -8.03 | -0.14% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1206.60 | -23.99 | -1.95% | Gold R | 19:58 | 14014.54 | -315.51 | -2.20% | Gold R/kg | 19:58 | 450642 | -9617 | -2.09% | Silver $ | 19:59 | 16.3860 | -.9040 | -5.23% | Platinum $ | 19:59 | 1174.40 | -27.60 | -2.30% | Palladium $ | 19:59 | 783.98 | -2.22 | -0.28% | R186 | 16:46 | 7.61 | .07 | 0.86% | R204 | 16:46 | 6.82 | .01 | 0.07% | R207 | 16:46 | 6.97 | .01 | 0.22% | Brent Crude | 19:58 | 61.16 | 3.77 | 6.57% | Rand / Dollar | 19:59 | 11.6156 | -0.0282 | -0.24% | Rand / Pound | 19:55 | 17.8106 | -0.0477 | -0.27% | Rand / Euro | 19:55 | 13.2626 | 0.0460 | 0.35% | Rand / NZD | 19:58 | 8.7495 | 0.0259 | 0.30% | Rand / AUD | 19:55 | 9.0894 | 0.0433 | 0.48% | Yen / Dollar | 19:59 | 119.0900 | 0.6200 | 0.52% | Euro / Dollar | 19:55 | 0.8755 | -0.0057 | -0.65% | Dollar / Euro | 19:59 | 1.1417 | 0.0071 | 0.62% | Pound / Dollar | 19:55 | 0.6508 | -0.0001 | -0.02% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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17/02/2015 | 140 | 231 | 53 | 424 | 275,007,171 | R15,991,048,647 | 181332 | 1379226 | 16/02/2015 | 139 | 200 | 70 | 409 | 175,784,087 | R12,722,169,050 | 170331 | 1089497 | 13/02/2015 | 241 | 131 | 46 | 418 | 244,020,568 | R18,055,271,657 | 235589 | 1398287 | 12/02/2015 | 197 | 151 | 63 | 411 | 266,875,219 | R17,577,919,495 | 232519 | 287163 | 11/02/2015 | 162 | 185 | 67 | 414 | 224,319,127 | R15,035,490,587 | 197157 | 916363 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 46,714.30 | -108.14 | -0.23% | Industrial | 73,677.39 | -96.29 | -0.13% | Mid Cap | 74,031.20 | -609.97 | -0.82% | Small Cap | 60,058.81 | -83.14 | -0.14% | Resource 20 | 46,160.02 | -250.94 | -0.54% | Industrial 25 | 65,283.61 | -99.69 | -0.15% | Financial 15 | 16,740.67 | -62.40 | -0.37% | Financial & Ind. 30 | 69,990.98 | -124.92 | -0.18% | All Share | 52,833.48 | -162.41 | -0.31% | Oil & Gas | 35,803.59 | -217.10 | -0.60% | Mining | 27,783.85 | -187.67 | -0.67% | Gold Mining | 1,400.50 | -62.12 | -4.25% | Platinum Mining | 36.08 | -1.03 | -2.78% | GENERAL MINING | 8,016.99 | 7.73 | 0.10% | Oil & Gas Producers | 19,250.93 | -116.73 | -0.60% | Basic Materials | 25,317.40 | -194.26 | -0.76% | Chemicals | 22,254.04 | -171.26 | -0.76% | Forestry & Paper | 37,992.38 | -554.27 | -1.44% | Industrial Metals | 13,344.31 | -201.25 | -1.49% | Industrials | 48,071.90 | -60.38 | -0.13% | General Industrials | 168.02 | -.62 | -0.37% | Consumer Goods | 64,843.95 | 239.62 | 0.37% | Automobiles & Parts | 7,042.47 | 22.65 | 0.32% | Household Goods | 455.69 | 3 | 0.58% | Health Care | 11,286.15 | -73.12 | -0.64% | Beverages | 216.67 | 1.29 | 0.60% |
| | Index Name | RP | Move | % Move | Food Producers | 9,430.84 | 60.98 | 0.65% | Personal Goods | 1,024.93 | -2.00 | -0.19% | Consumer Services | 15,407.00 | -87.94 | -0.57% | General Retailers | 83,246.43 | -1583.98 | -1.87% | Travel & Leisure | 6,558.35 | -71.59 | -1.08% | Media | 358.25 | .14 | 0.04% | Support Services | 2,851.21 | -.01 | -0.00% | Telecommunications | 10,630.68 | -13.25 | -0.12% | Financials | 43,674.23 | -193.77 | -0.44% | Banks | 76,832.34 | -193.45 | -0.25% | Non-life Insurance | 59,211.52 | -1020.89 | -1.69% | Life Insurance | 41,713.21 | -135.60 | -0.32% | General Financial | 4,054.79 | 16.75 | 0.41% | Technology | 53,967.98 | -202.87 | -0.37% | SHARIAH TOP40 | 3,731.36 | -8 | -0.22% | FTSE/JSE SHARIAH ALL | 3,995.11 | -10 | -0.24% | COAL MINING | 13,890.76 | -78 | -0.56% | FTSE JSE Fledgling | 6,816.78 | -24 | -0.34% | FTSE/JSE Alt X | 1,500.45 | 4 | 0.28% | SA LISTED PROPERTY | 637.09 | | -1.56% | CAPPED PROPERTY | 553.68 | | -1.37% | RESOURCE | 25,365.43 | -168 | -0.66% | DIVIDEND PLUS | 244.15 | -1 | -0.35% | FTSE/JSE RAFI 40 | 10,070.52 | -43 | -0.42% | Capped Top 40 | 24,946.28 | -61 | -0.24% | Capped All Share | 26,798.10 | -82 | -0.31% | JSE TABACO | 8,315.44 | 62 | 0.75% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | MMI | MMI HOLDINGS LTD | HOLD | 13/02/2015 | SLM | SANLAM LIMITED | HOLD | 13/02/2015 | TBS | TIGER BRANDS LTD | HOLD | 13/02/2015 | OML | OLD MUTUAL PLC | BUY | 13/02/2015 | ASR | ASSORE LTD | HOLD | 13/02/2015 |
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Results Expected** Expected | Company Name | Fin. Date | 18/02/2015 | ARCMITTAL | September 2014 (Q) | 18/02/2015 | BLUETEL | November 2014 (Interim) | 18/02/2015 | CITYLDG | December 2014 (Interim) | 18/02/2015 | DISCOVERY | December 2014 (Interim) | 18/02/2015 | DSY B PREF | December 2014 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | DISTELL | 16/02/15 | 06/03/15 | 16/03/15 | ZAR 1.5800 | ITLTILE | 16/02/15 | 06/03/15 | 16/03/15 | ZAR 0.1200 | NEWWVEGBP | 13/02/15 | 27/02/15 | 31/03/15 | ZAR 0.0200 | ANGLO | 13/02/15 | 13/03/15 | 28/04/15 | USD 0.5300 | WOOLIES | 12/02/15 | 27/02/15 | 09/03/15 | ZAR 0.9650 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | IMPL CONV | 29/01/15 | 13/02/15 | 23/02/15 | ZAR 250.0000 | FIRSTRANDB-P | 27/01/15 | 13/02/15 | 23/02/15 | ZAR 3.4851 | CAPPROP | 28/01/15 | 13/02/15 | 23/02/15 | ZAR 0.4422 | SEKUNJALO | 04/11/14 | 13/02/15 | 23/02/15 | ZAR 0.0200 |
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Upcoming AGMs** Code | Company Name | Date | Status | AHL | AH-Vest Ltd. | 19/02/2015 | Confirmed | RDF | Redefine Properties Ltd. | 19/02/2015 | Confirmed | ACE | Accentuate Ltd. | 20/02/2015 | Confirmed | QFH | Quantum Foods Holdings Ltd. | 20/02/2015 | Confirmed | DIB | Dipula Income Fund Ltd. | 23/02/2015 | Confirmed |
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