Tuesday, 07 July 2015 - 20:00
Charts
Seed Weekly - Local vs Global
It’s an age old question, “Should I invest locally, or abroad?"
While this appears to be a fairly straightforward question, it is one that can be attacked from various angles. As a general case, Seed would typically have at least a small allocation to both, because the diversification benefits obtained by investing across geographies greatly enhances an investor’s expected risk adjusted returns. What we continuously grapple with is the relative weighting to each of these geographies (bearing in mind that ‘global’ in itself is made up of a multitude of regions) when considering an investor’s specific requirements.
Let’s start with the local market. Over the course of the past few years we have often written about the composition of the local market and how it is no longer just exposed to the local economy (it now has greater exposure to foreign economies). It has changed dramatically over the years. Everyone knows that South Africa relies less on resources now than it did in the past, but the chart below taken from BCA’s latest Quarterly Report was quite eye opening.
In the space of 7 short years the composition of the local market (using the MSCI index – which is comprised of only those companies with a primary listing in South Africa, i.e. excluding British American Tobacco, SABMiller, Glencore, Richemont, BHPBilliton, Anglo American, etc) has changed from being dominated by materials (primarily resource companies) to one that is dominated by consumer discretionary companies (Naspers, Steinhoff, etc).
When looking at the composition of the more commonly referenced ALSI in the chart below – a similar trend can be seen. As a result, a lot of historical analysis on the local ‘market’ has to be discounted to a certain extent.
A conclusion from these charts is that the South African market is no longer a good proxy for South African company earnings. Also, the broad composition of any index can and does often change quite dramatically over time. While resources were once of major importance for any local investor, they are now less important than consumer services, financials, and consumer goods! Equally, indices around the world are often not representative of the country’s underlying economy. Investors should therefore be wary of blindly investing into ‘market’ indices.
Another important determinant of where one should invest is valuations. In this regard BCA also look at various valuation measures. The chart below shows how global markets are currently approaching expensive territory while local markets, despite the recent correction, are also still very expensive when applying Seed’s various valuation measures.
Again, the definition of ‘global equity’ is very broad and will incorporate regions that are more expensive and cheaper than the average shown above. With global equities closer to being ‘expensive’ than ‘fair’ or ‘inexpensive’ it is fair enough to ask why our Funds are typically overweight global equity. The short answer (backed up by other, independent, research) is that most other assets are also expensive, and that equities at least offer the patient investor an opportunity to participate in a growing income stream.
Markets have evolved to such an extent that investors can no longer just ‘look at the box’ when making investments. At the bear minimum they need to ‘look inside the box’ to ensure that they are, in fact, exposing themselves to their desired risk drivers. Professional managers allocate significant human resources to fully understand these dynamics, and then construct portfolios that blend and diversify the various risks on offer to generate superior risk adjusted returns.
Take care,
Mike Browne
Tel 021 914 4966
Fax 021 914 4912
Email info@seedinvestments.co.za
Seed is hiring: Click through to our LinkedIn page to see available vacancies
www.seedinvestments.co.za
Tue, 07 Jul 2015
Top News
Local markets
Resouce shares fell 3.89% on Tuesday, leading losses across the board on the JSE. The All Share ended 2.69% lower. Full story
South Africa's rand slipped over one percent to 12.5130 versus the greenback on Tuesday, its weakest in over three weeks as the dollar rose sharply, buoyed by a euro laid low by the worsening Greek crisis. Full story |
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Greek officials said on Tuesday they had submitted credit proposals to euro zone partners based on those it put forward last week, rejecting suggestions that Athens had not put forward new proposals for a euro summit. Full storyAfghan President Ashraf Ghani said on Tuesday he had sent a delegation to Pakistan to meet Taliban representatives, his first acknowledgement of official talks with insurgents who are fighting to topple the government in Kabul. Full storyGreek Prime Minister Alexis Tsipras launched a desperate bid to win fresh aid from sceptical creditors at an emergency euro zone summit on Tuesday, before his country's banks run out of money. Full story |
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Markets | Global equity markets fell on
Tuesday and the euro hit a five-week low against the dollar as
euro zone leaders held an emergency. . . Full story | | Gold fell to a near four-month
low on Tuesday as the dollar climbed ahead of an emergency euro
zone summit on Greece with. . . Full story | | Hong Kong stocks fell on Tuesday, dragged
down by a slumping mainland market, as well as bearish global
markets amid fears that the. . . Full story | | China's main stock indexes
slumped over 5 percent at one point on Tuesday but ended the
session down less than 2 percent, aided. . . Full story |
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| Japan's Nikkei share average
rebounded on Tuesday as bargain hunters stepped in a day after
Greek angst triggered a sharp fall, but uncertainty. . . Full story | | Australian shares
rebounded 1.7 percent on Tuesday on broad-based gains following
two-losing sessions, as investors sought to buy stocks cheapened
by the debt crisis. . . Full story | | Gold eked out small
gains on Monday in a rare spurt of safe-haven buying after Greek
voters rejected terms of a bailout package,. . . Full story | | Equity markets around the
world fell on Monday and U.S. oil prices tumbled 7 percent after
Greece overwhelmingly voted against conditions for a. . . Full story |
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SA Business | China's central bank has signed an agreement with the South African central bank to clear yuan transactions in the country, the People's Bank of China said in a statement on Tuesday.. . . Full story | | South Africa's net gold and foreign exchange reserves ticked slightly higher to $41.59 billion in June from $41.519 billion in May, data from the Reserve Bank showed on Tuesday.. . . Full story |
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| South African shares fell
almost 3 percent to six-month lows on Tuesday, knocked by a
combination of Greece's problems and skidding commodity prices.. . . Full story | | Cupric Canyon Capital, a private equity firm backed by a unit of Barclays Plc, will spend $200 million to bring its. . . Full story | | South Africa's business confidence fell 2.3 index points in June to its lowest in more than 16 years, a survey showed. . . Full story | | South Africa's rand traded
near the previous session's three week lows on Tuesday, taking
its cue from weak markets in major commodity importer. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 49997.79 | -1383.43 | -2.69% | JSE Top 40 | 17:00 | 44377.00 | -1355.42 | -2.96% | JSE Gold | 17:00 | 1020.52 | -4.91 | -0.48% | JSE Financial | 17:00 | 42544.54 | -1069.24 | -2.45% | JSE Industrial | 17:00 | 72355.73 | -1877.17 | -2.53% | JSE Indust 25 | 17:00 | 64338.92 | -1743.34 | -2.64% | JSE Resource | 17:00 | 36822.94 | -1490.23 | -3.89% | DJ Futures | 19:48 | 17551.00 | -76.00 | -0.43% | DJ Ind | 19:58 | 17662.43 | -21.15 | -0.12% | SP 500 | 19:58 | 2068.01 | -0.75 | -0.04% | Nasdaq | 19:58 | 4965.71 | -26.23 | -0.53% | FTSE 100 | 16:30 | 6464.54 | -71.14 | -1.09% | DAX | 18:08 | 10676.78 | -213.85 | -1.96% | CAC40 | 18:08 | 4604.64 | -106.90 | -2.27% | Nikkei | 08:38 | 20376.59 | 264.47 | 1.31% | Shanghai | 09:28 | 3727.12 | -48.79 | -1.29% | Hang-Seng | 10:28 | 24975.31 | -260.97 | -1.03% | All Ords | 08:42 | 5564.00 | 100.70 | 1.84% | NZSE 50 | 08:48 | 5803.17 | 26.55 | 0.46% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1154.49 | -15.65 | -1.34% | Gold R | 19:58 | 14403.95 | -67.56 | -0.47% | Gold R/kg | 19:58 | 463265 | -197 | -0.04% | Silver $ | 19:59 | 15.0150 | -.7100 | -4.52% | Platinum $ | 19:59 | 1040.41 | -18.59 | -1.76% | Palladium $ | 19:59 | 645.75 | -33.75 | -4.97% | R186 | 17:34 | 8.28 | .02 | 0.24% | R204 | 17:33 | 7.53 | -.01 | -0.13% | R207 | 17:33 | 7.76 | -.00 | -0.06% | Brent Crude | 19:48 | 56.65 | -5.42 | -8.73% | USD / ZAR | 19:59 | 12.4754 | 0.1074 | 0.87% | GBP / ZAR | 19:55 | 19.2279 | -0.0428 | -0.22% | EUR/ ZAR | 19:55 | 13.6747 | -0.0062 | -0.05% | NZD/ ZAR | 19:58 | 8.2985 | 0.0463 | 0.56% | AUD / ZAR | 19:55 | 9.2733 | -0.0102 | -0.11% | USD / JPY | 19:59 | 122.4050 | -0.1540 | -0.13% | EUR / USD | 19:59 | 1.0965 | -0.0090 | -0.82% | GBP / USD | 19:59 | 1.5444 | -0.0158 | -1.01% |
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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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07/07/2015 | 93 | 264 | 59 | 416 | 284,608,211 | R22,685,412,429 | 264700 | 1714455 | 06/07/2015 | 119 | 216 | 64 | 399 | 173,172,473 | R14,548,310,085 | 158080 | 536591 | 03/07/2015 | 174 | 199 | 66 | 439 | 139,198,677 | R9,676,984,979 | 129757 | 921125 | 02/07/2015 | 198 | 138 | 63 | 399 | 253,088,414 | R16,290,494,893 | 204890 | 1533953 | 01/07/2015 | 155 | 181 | 62 | 398 | 247,087,957 | R16,483,593,571 | 244693 | 1485093 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 44,377.00 | -1355.42 | -2.96% | Industrial | 72,355.73 | -1877.17 | -2.53% | Mid Cap | 67,662.65 | -1029.03 | -1.50% | Small Cap | 59,058.95 | -354.45 | -0.60% | Resource 20 | 36,822.94 | -1490.23 | -3.89% | Industrial 25 | 64,338.92 | -1743.34 | -2.64% | Financial 15 | 16,038.50 | -505.91 | -3.06% | Financial & Ind. 30 | 68,932.07 | -1930.00 | -2.72% | All Share | 49,997.79 | -1383.43 | -2.69% | Oil & Gas | 88,887.89 | 14391.37 | 19.32% | Mining | 22,143.59 | -897.05 | -3.89% | Gold Mining | 1,020.52 | -4.91 | -0.48% | Platinum Mining | 24.49 | -.96 | -3.77% | GENERAL MINING | 6,582.00 | -301.54 | -4.38% | Oil & Gas Producers | 47,793.38 | 7737.98 | 19.32% | Basic Materials | 21,269.42 | -833.07 | -3.77% | Chemicals | 20,959.10 | -1083.65 | -4.92% | Forestry & Paper | 42,828.81 | -408.56 | -0.94% | Industrial Metals | 7,085.81 | -364.26 | -4.89% | Industrials | 43,717.81 | -882.90 | -1.98% | General Industrials | 155.22 | -3.15 | -1.99% | Consumer Goods | 63,766.88 | -1160.77 | -1.79% | Automobiles & Parts | 7,864.46 | -47.56 | -0.60% | Household Goods | 499.41 | -18 | -3.55% | Health Care | 9,536.09 | -232.41 | -2.38% | Beverages | 215.59 | -2.15 | -0.99% |
| | Index Name | RP | Move | % Move | Food Producers | 8,400.88 | -292.27 | -3.36% | Personal Goods | 969.50 | -19.67 | -1.99% | Consumer Services | 15,922.32 | -493.82 | -3.01% | General Retailers | 81,837.53 | -2797.42 | -3.31% | Travel & Leisure | 6,003.34 | -80.86 | -1.33% | Media | 385.25 | -11.78 | -2.97% | Support Services | 3,421.79 | -3.80 | -0.11% | Telecommunications | 10,594.81 | -420.11 | -3.81% | Financials | 42,544.54 | -1069.24 | -2.45% | Banks | 74,546.73 | -3081.07 | -3.97% | Non-life Insurance | 55,638.41 | -255.22 | -0.46% | Life Insurance | 39,091.05 | -1268.94 | -3.14% | General Financial | 4,397.47 | -116.70 | -2.59% | Technology | 63,746.83 | -598.45 | -0.93% | SHARIAH TOP40 | 3,370.97 | -139 | -3.97% | FTSE/JSE SHARIAH ALL | 3,596.88 | -131 | -3.51% | COAL MINING | 9,830.23 | -220 | -2.19% | FTSE JSE Fledgling | 6,704.18 | -27 | -0.40% | FTSE/JSE Alt X | 1,307.78 | -12 | -0.89% | SA LISTED PROPERTY | 617.98 | | 0.84% | CAPPED PROPERTY | 538.92 | | 0.39% | RESOURCE | 20,108.76 | -813 | -3.88% | DIVIDEND PLUS | 211.53 | -6 | -2.95% | FTSE/JSE RAFI 40 | 9,193.92 | -309 | -3.25% | Capped Top 40 | 23,674.23 | -730 | -2.99% | Capped All Share | 25,359.79 | -702 | -2.69% | JSE TABACO | 8,539.19 | -112 | -1.30% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | S32 | SOUTH32 LIMITED | SELL | 03/07/2015 | ARI | AFRICAN RAINBOW MINERALS | BUY | 03/07/2015 | ASR | ASSORE LTD | HOLD | 03/07/2015 | SOL | SASOL LIMITED | BUY | 03/07/2015 | SHF | STEINHOFF INTERNATIONAL H... | BUY | 03/07/2015 |
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Results Expected** Expected | Company Name | Fin. Date | 08/07/2015 | SACOVEN | March 2015 (Final) | 09/07/2015 | STELLAR | February 2015 (Interim) | 14/07/2015 | ZCI | March 2015 (Final) | 15/07/2015 | ROCKWELL | May 2015 (Q) | 15/07/2015 | SIBANYE | June 2015 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | ILRPREF1 | 30/06/15 | 17/07/15 | 27/07/15 | ZAR 12.8930 | AMECOR | 30/06/15 | 17/07/15 | 27/07/15 | ZAR 0.0800 | NICTUS | 30/06/15 | 17/07/15 | 27/07/15 | ZAR 0.0300 | ARGENT | 30/06/15 | 25/09/15 | 05/10/15 | ZAR 0.0900 | ILPREF2 | 30/06/15 | 17/07/15 | 27/07/15 | ZAR 13.8847 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | AME | 04/06/15 | 03/07/15 | 13/07/15 | ZAR 2.5000 | FAMBRANDS | 25/05/15 | 03/07/15 | 13/07/15 | ZAR 2.0000 | CROOKES | 02/06/15 | 03/07/15 | 13/07/15 | ZAR 0.8500 | TASTE | 26/05/15 | 03/07/15 | 13/07/15 | ZAR 0.0650 | STENPROP | 11/06/15 | 03/07/15 | 16/07/15 | EUR 0.0420 |
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Upcoming AGMs** Code | Company Name | Date | Status | STP | Stenprop Ltd. | 10/07/2015 | Unconfirmed |
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