Thursday, 22 October 2015 - 20:00
Charts
Seed Weekly - CPI in Investment Benchmarking
It is easy to determine that investing is important, but with all the choices available, it becomes a more arduous task deciding how or with who to invest. A simplistic way of solving this problem is to look for a product that “performs very well” thereby protecting and growing your wealth. Trying to determine what performs well requires comparisons and such comparisons require an appropriate benchmark. Typically, a good investment benchmark should be unambiguous (specific with a stipulated way of measurement that is quantifiable) and investable (thus replicable or trackable). The fact that a good benchmark is investable would naturally exclude the Consumer Price Index (CPI) as benchmark. Why is it then that we commonly come across CPI benchmarks? What is the case for CPI benchmarks?
CPI Inflation is an important concept that investors need to be cognisant of. CPI is a monthly data set of price changes in goods and services purchased by consumers. Due to inflation, R100 in your pocket 25 years ago, is now worth roughly R16 because of the erosion effect of inflation on purchasing power. Put differently, for you to be able to buy the same amount of goods that you bought with R100 twenty-five years ago, you would need to have R601 in your pocket today, a compounded growth rate of roughly 7.2% per annum. It is in light of this that your investment at the very least, should maintain the purchasing power of its assets. Therefore, it becomes important to track investment performance against a CPI target, making that a break-even level of performance.
The chart above depicts the performance of the average equity manager as represented by the sector average of the ASISA SA Equity General category relative to the All Share Index and SA CPI. As can be seen, the average equity manager moves in line with the index as expected with periods of outperformance and underperformance. It makes sense to use the index in this case to benchmark the performance of the equity manager, where you would expect skill to be the determining factor for outperformance. However, there are also periods where the average manager and the index do not do as well as inflation. As an investor, it is important to know that whilst your investment may be beating its respective benchmark, is it also maintaining the purchasing power of the assets.
Consider a 5 year investment period from 2007 to 2012. The markets were depressed during the global financial crisis. The average equity manager closely tracked the performance of the FTSE/JSE All Share Index, whilst the Multi-Asset High Equity category which is expected to offer better capital protection did slightly better. However, it can be noted that over the same period, an investment at the rate of inflation would have done much better. This suggests that an investment can do better than its benchmark whilst the purchasing power of its assets is actually being eroded, which is why it’s important to look at CPI. In addition, it is important to focus on long term investing, because with sufficient time, good investments tend to recover and eventually outperform the CPI target as per historical numbers.
Using CPI as a target allows an investor to determine whether their investments are at a minimum, maintaining their purchasing power. Equally, this target emphasizes investment diversification of its assets as with the multi-asset portfolios which offer better capital protection. Diversification contributes towards inflationary risk protection. Therefore, incorporating an inflation target objective is deemed appropriate when defining investment objectives holistically.
While past performance is not an indication of future returns, our rigorous investment process combined with investment experience allows us to make prudent investment decisions in order to protect against the negative impacts of inflation.
Kind Regards,
Tawanda Mushore
Tel +27 21 914 4966
Fax +27 21 914 4912
Email info@seedinvestments.co.za
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www.seedinvestments.co.za
Thu, 22 Oct 2015
Top News
Local markets
On Thursday, the JSE All Share finished 0.56% higher, led by 1.72% gains in gold miners and 1.32% advances in resource shares. Full story
South Africa's rand firmed 1 percent against dollar to 13.3950 on Thursday, recovering some of its losses from the previous session when investors pulled back after finance minister Nhlanhla Nene cut this year's growth forecast.
"The rand was a bit oversold after yesterday," said R Full story |
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A masked man killed a teacher and a boy and wounded two others in a Swedish school on Thursday, stabbing them as he walked from classroom to classroom before being fatally wounded by police marksmen, officers said. Full storyU.S. Secretary of State John Kerry on Thursday voiced cautious hope there may be a way to defuse Israeli-Palestinian violence that has killed nearly 60 people this month. Full storyAt least 20 Houthi militia fighters were killed in heavy clashes in Yemen's third-largest city Taiz on Thursday, a day after they pounded it with rockets, forces loyal to the government said. Full story |
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SA Business | The South African central bank's inflation target of 3-6 percent target will be breached twice in 2016 with a worsening long-term outlook, Governor Lesetja Kganyago said on Thursday.. . . Full story | | South Africa's rand hovered near the previous day's week lows against the dollar on Thursday and was likely to stay under pressure after the Finance Minister painted a dim picture of. . . Full story | | South African riot police fired stun grenades on Wednesday at hundreds of protesting students who stormed the parliament precinct in Cape Town to try to disrupt the reading of Finance Minister. . . Full story |
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| South African President Jacob
Zuma will meet student leaders and university authorities on
Friday to discuss planned hikes in tuition fees that have
provoked. . . Full story | | The line between government finance and the politics of the street in South Africa has seldom been as thin as this. . . Full story | | South African retailer Clicks Group on Thursday reported a 16.8 percent rise in full-year profit, despite sluggish economic growth in Africa's. . . Full story | | MTN Group, Africa's largest mobile phone operator, reported a slowdown in quarterly subscriber growth on Thursday, squeezed by stiff competition and. . . Full story |
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| The South African central bank's inflation target of 3-6 percent target will be breached twice in 2016 amid a worsening long-term. . . Full story | | South Africa's National Union of Mineworkers (NUM) has signed a three-year wage deal with bullion producer Sibanye Gold for increases of. . . Full story | | South Africa's biggest fast-food restaurant chain Famous Brands said on Thursday half-year profit rose 14 percent as consumers opted to eat. . . Full story | | The U.S. State Department expressed concern on Wednesday over reports that South African riot police had fired stun grenades at. . . Full story |
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Company News | Shareholders are advised that the CompanyÆs integrated annual report, incorporating the audited annual financial statements for the year ended 31 May. . . Full story | | In compliance with paragraph 3.59(c) of the Listings Requirements of the JSE Ltd., shareholders are hereby notified of the following change. . . Full story | | Shareholders are advised that, at the annual general meeting of Value held on 21 October 2015, all resolutions as set out. . . Full story | | The board of Stefanutti Stocks provided shareholders with a trading update of the GroupÆs results for the six months ended 31. . . Full story |
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| In terms of section 45(5) of the Companies Act, notice is hereby provided to shareholders that, by virtue of the authority. . . Full story | | Kumba released its production and sales report for the quarter ended 30 September 2015. Throughout this report, production and sales volumes. . . Full story | | Amplats releases their production report for the third quarter ended 30 September 2015.
Anglo American Platinum remains committed to zero harm and. . . Full story | | Anglo released their production report for the third quarter ended 30 September 2015.
Highlights include:
- Q3 2015 production increased by 2% (on. . . Full story |
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Company Results | Revenue for the interim period increased to USD3.286 billion (2014: USD2.984 billion), while gross profit lowered to USD430.2 million (2014: USD446.2. . . Full story | | Turnover lowered to R758.1 million (R897.8 million). Gross profit decreased to R97.3 million (R120.4 million). Operating profit also dropped to R18.6. . . Full story | | Revenue for the interim period came in at R5.5 billion (R5.5 billion). Gross profit rose to R813.0 million (R729.3 million). Operating. . . Full story | | Revenue for the interim period increased to R7.8 billion (2014: R6.4 billion), gross profit rose to R1.2 billion (2014: R1 billion). . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 53293.97 | 296.00 | 0.56% | JSE Top 40 | 17:00 | 47814.72 | 220.13 | 0.46% | JSE Gold | 17:00 | 1055.47 | 17.84 | 1.72% | JSE Financial | 17:00 | 44835.44 | 193.60 | 0.43% | JSE Industrial | 17:00 | 79366.47 | 374.64 | 0.47% | JSE Indust 25 | 17:00 | 71428.40 | 251.43 | 0.35% | JSE Resource | 17:00 | 34856.04 | 454.94 | 1.32% | DJ Futures | 19:42 | 17389.00 | 333.00 | 1.95% | DJ Ind | 19:58 | 17448.77 | 280.16 | 1.63% | SP 500 | 19:58 | 2049.87 | 30.93 | 1.53% | Nasdaq | 19:58 | 4907.52 | 67.40 | 1.39% | FTSE 100 | 16:39 | 6376.42 | 28.00 | 0.44% | DAX | 18:08 | 10491.97 | 253.87 | 2.48% | CAC40 | 18:08 | 4802.18 | 107.08 | 2.28% | Nikkei | 08:28 | 18435.87 | -118.41 | -0.64% | Shanghai | 09:28 | 3368.74 | 48.06 | 1.45% | Hang-Seng | 10:28 | 22845.37 | -143.85 | -0.63% | All Ords | 07:38 | 5299.60 | 13.10 | 0.25% | NZSE 50 | 07:28 | 5923.60 | 5.34 | 0.09% |
| | Name | Time | RP | Move | % Move | Gold $ | 20:00 | 1165.70 | -1.02 | -0.09% | Gold R | 19:59 | 15630.95 | 15630.95 | 0.00% | Gold R/kg | 19:58 | 502621 | -3825 | -0.76% | Silver $ | 20:00 | 15.8410 | .1470 | 0.94% | Platinum $ | 19:59 | 1010.41 | 7.61 | 0.76% | Palladium $ | 20:00 | 684.56 | 12.56 | 1.87% | R186 | 15:07 | 8.39 | -.02 | -0.24% | R204 | 15:07 | 7.44 | -.05 | -0.73% | R207 | 15:07 | 7.72 | -.05 | -0.64% | Brent Crude | 16:42 | 48.64 | -.07 | -0.14% | USD / ZAR | 20:00 | 13.4077 | -0.0935 | -0.69% | GBP / ZAR | 19:55 | 20.6022 | -0.1864 | -0.90% | EUR/ ZAR | 19:55 | 14.9089 | -0.4051 | -2.65% | NZD/ ZAR | 19:59 | 9.0784 | 9.0784 | 0.00% | AUD / ZAR | 19:55 | 9.6545 | -0.0894 | -0.92% | USD / JPY | 20:00 | 120.6010 | 0.6660 | 0.56% | EUR / USD | 19:59 | 1.1122 | -0.0217 | -1.91% | GBP / USD | 20:00 | 1.5392 | -0.0023 | -0.15% |
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The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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22/10/2015 | 205 | 145 | 52 | 402 | 256,625,947 | R16,661,057,196 | 222125 | 1970996 | 21/10/2015 | 149 | 182 | 68 | 399 | 237,499,614 | R16,313,691,266 | 212983 | 1846121 | 20/10/2015 | 143 | 195 | 51 | 389 | 263,649,514 | R16,644,161,842 | 214095 | 1549819 | 19/10/2015 | 194 | 145 | 52 | 391 | 281,456,395 | R19,793,612,526 | 230719 | 1728271 | 16/10/2015 | 165 | 166 | 74 | 405 | 276,359,763 | R17,887,088,542 | 198388 | 1851831 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 47,814.72 | 220.13 | 0.46% | Industrial | 79,366.47 | 374.64 | 0.47% | Mid Cap | 68,374.56 | 860.36 | 1.27% | Small Cap | 58,756.58 | 197.09 | 0.34% | Resource 20 | 34,856.04 | 454.94 | 1.32% | Industrial 25 | 71,428.40 | 251.43 | 0.35% | Financial 15 | 16,713.91 | 56.66 | 0.34% | Financial & Ind. 30 | 75,512.63 | 232.59 | 0.31% | All Share | 53,293.97 | 296.00 | 0.56% | Oil & Gas | 9,320.53 | .00 | 0.00% | Mining | 20,760.33 | 265.80 | 1.30% | Gold Mining | 1,055.47 | 17.84 | 1.72% | Platinum Mining | 20.21 | .34 | 1.71% | GENERAL MINING | 6,172.90 | 75.79 | 1.24% | Oil & Gas Producers | 50,114.77 | .00 | 0.00% | Basic Materials | 20,787.63 | 166.34 | 0.81% | Chemicals | 21,345.35 | 9.20 | 0.04% | Forestry & Paper | 49,725.55 | -76.50 | -0.15% | Industrial Metals | 5,081.08 | -222.55 | -4.20% | Industrials | 45,112.21 | -42.51 | -0.09% | General Industrials | 164.77 | -.59 | -0.36% | Consumer Goods | 76,968.98 | -245.29 | -0.32% | Automobiles & Parts | 6,363.13 | 45.29 | 0.72% | Household Goods | 578.53 | 2 | 0.31% | Health Care | 9,541.64 | 85.89 | 0.91% | Beverages | 275.81 | -4.67 | -1.67% |
| | Index Name | RP | Move | % Move | Food Producers | 9,228.17 | 137.90 | 1.52% | Personal Goods | 1,137.49 | 10.89 | 0.97% | Consumer Services | 17,123.20 | 267.03 | 1.58% | General Retailers | 8,149.76 | 179.48 | 2.25% | Travel & Leisure | 5,928.40 | 80.05 | 1.37% | Media | 431.96 | 5.46 | 1.28% | Support Services | 2,872.05 | -28.95 | -1.00% | Telecommunications | 9,487.35 | 194.52 | 2.09% | Financials | 44,835.44 | 193.60 | 0.43% | Banks | 7,456.63 | 39.07 | 0.53% | Non-life Insurance | 56,774.15 | -906.04 | -1.57% | Life Insurance | 41,305.35 | -77.56 | -0.19% | General Financial | 4,775.87 | 29.31 | 0.62% | Technology | 59,858.27 | -549.45 | -0.91% | SHARIAH TOP40 | 3,301.40 | 34 | 1.05% | FTSE/JSE SHARIAH ALL | 3,519.54 | 35 | 1.02% | COAL MINING | 7,392.90 | -178 | -2.35% | FTSE JSE Fledgling | 6,667.33 | -15 | -0.22% | FTSE/JSE Alt X | 1,557.99 | 13 | 0.87% | SA LISTED PROPERTY | 657.48 | | 0.77% | CAPPED PROPERTY | 590.36 | | 0.76% | RESOURCE | 18,853.77 | 241 | 1.30% | DIVIDEND PLUS | 204.22 | 2 | 0.74% | FTSE/JSE RAFI 40 | 9,363.01 | 37 | 0.40% | Capped Top 40 | 25,407.97 | 121 | 0.48% | Capped All Share | 27,029.14 | 150 | 0.56% | JSE TABACO | 10,104.91 | -32 | -0.32% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | SGL | SIBANYE GOLD LIMITED | HOLD | 19/10/2015 | MND | MONDI LIMITED | BUY | 19/10/2015 | BVT | THE BIDVEST GROUP LIMITED | HOLD | 19/10/2015 | SPP | THE SPAR GROUP LTD | BUY | 19/10/2015 | ANG | ANGLOGOLD ASHANTI LIMITED | BUY | 19/10/2015 |
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Results Expected** Expected | Company Name | Fin. Date | 23/10/2015 | AQUARIUS | September 2015 (Q) | 23/10/2015 | AQUARIUSCVT | September 2015 (Q) | 27/10/2015 | FAMBRANDS | August 2015 (Interim) | 27/10/2015 | OANDO | June 2015 (Interim) | 27/10/2015 | SVF | June 2015 (Final) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | ADCORP | 21/10/15 | 27/11/15 | 07/12/15 | ZAR 0.6000 | VALUE | 21/10/15 | 08/01/16 | 18/01/16 | ZAR 0.0500 | DATATEC | 21/10/15 | 20/11/15 | 30/11/15 | ZAR 1.0500 | CMH | 21/10/15 | 04/12/15 | 14/12/15 | ZAR 0.4650 | EQUITES | 15/10/15 | 30/10/15 | 09/11/15 | ZAR 0.1639 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | ILPREF2 | 30/09/15 | 16/10/15 | 26/10/15 | ZAR 13.2937 | ILRPREF1 | 30/09/15 | 16/10/15 | 26/10/15 | ZAR 13.2937 | CAPITEC | 29/09/15 | 16/10/15 | 26/10/15 | ZAR 3.7500 | ELBGROUP | 23/09/15 | 16/10/15 | 26/10/15 | ZAR 0.6700 | RCL | 01/09/15 | 16/10/15 | 26/10/15 | ZAR 0.2200 |
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Upcoming AGMs** Code | Company Name | Date | Status | SVB | SilverBridge Holdings Ltd. | 27/10/2015 | Confirmed | AEGCB | Aveng Ltd. | 27/10/2015 | Confirmed | AEG | Aveng Ltd. | 27/10/2015 | Confirmed | DST | Distell Group Ltd. | 28/10/2015 | Confirmed | HCI | Hosken Consolidated Investments Ltd. | 29/10/2015 | Confirmed |
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