BCI CONFERENCE FIXED INCOME RISKS AND OPPORTUNITIES

Transcription

1 PRESENTED BY: MELANIE STOCKIGT BCI CONFERENCE FIXED INCOME RISKS AND OPPORTUNITIES MAY 2018 Straight Talking. Curved Thinking.

2 SETTING THE SCENE SOUTH AFRICAN 10 YEAR BOND YIELD PHASE 1 PAGE 2 Source: Tantalum, Bloomberg

3 SETTING THE SCENE GLOBAL YIELDS Rolling 12 month balance sheet changes from big 4 central banks Global policy rates Source: Deutsche Bank, Haver, ECB, Federal Reserve, Bank of Japan, Bank of England Source: IRESS, Bloomberg, RMB Global Markets PAGE 3

4 SETTING THE SCENE GLOBAL INFLATION Tight labour market should eventually drive wages higher US core inflation lags GDP growth and should increase Source: Credit Suisse Source: Deutsche Bank, BLS, Bloomberg Finance, Haver, BEA PAGE 4

5 SETTING THE SCENE GLOBAL INFLATION Fed and economists expecting a lift in Core PCE to 2% Fed Rate Expectations Source: Goldman Sachs Source: Bloomberg, Tantalum PAGE 5

6 SETTING THE SCENE US 10 YEAR YIELDS DECONSTRUCTED US 10 year yield US 10 year real yield and breakeven inflation Source: Tantalum, Bloomberg PAGE 6

7 GLOBAL ENVIRONMENT STAGFLATION Equities: Negative DM Bonds: Negative Commodities: Positive REFLATION Equities: Positive DM Bonds: Negative Commodities: Positive STAGNATION Equities: Negative DM Bonds: Positive Commodities: Negative GOLDILOCKS Equities: Positive DM Bonds: Positive Commodities: Negative PAGE 7

8 CURRENT MACRO VIEW SOUTH AFRICAN BONDS LESS VULNERABLE TO GLOBAL SELL OFF (BUT NOT IMMUNE) SA current account deficit SA R186 bond yield Source: SARB Source: Tantalum, Bloomberg PAGE 8

9 CURRENT MACRO VIEW SA BOND OUTLOOK SA 10 Year Bond Yield PHASE 1 PHASE 2 Source: Tantalum, Bloomberg PAGE 9

10 CURRENT MACRO VIEW THEME 1 RECOVERY IN SA ECONOMIC GROWTH, FISCAL REPAIR Recovery in (business and consumer) confidence holds near term key, then structural reforms Will growth lift be cyclical or structural? Business Confidence Source: BER, SACCI Consumer Confidence Source: Stats SA and SARB PAGE 10 Source: BER

11 CURRENT MACRO VIEW SA FISCAL OUTLOOK Budget Deficit % GDP S&P long-term foreign currency ratings & 5yr USD CDS Source: National Treasury Source: Tantalum, Bloomberg PAGE 11

12 CURRENT MACRO VIEW THEME 2 SARB S EMPHASIS ON LOWERING INFLATION EXPECTATIONS South African Inflation Inflation Expectations Source: Stats SA, SARB Source: BER, SARB PAGE 12

13 CURRENT MACRO VIEW NEAR TERM DRIVERS SWITCH FROM DOMESTIC TO GLOBAL GOLDILOCKS Opportunity POLITICS Risk GLOBAL DOMESTIC REFLATION Risk POLITICS Opportunity PAGE 13

14 Tantalum Capital is an Authorised Financial Services Provider Straight Talking. Curved Thinking. The combination of our unique investment DNA, thorough research methodology, and depth of experience means we consistently deliver smarter solutions to our clients.

15 IN CLOSING CONTACT US Simone Blanckenberg Tantalum Capital Ground Floor South Wing Great Westerford 240 Main Road Rondebosch 7700 PAGE 15

16 DISCLAIMER Investment in a fund carries a high degree of risk including, but not limited to, the risks referred to below. No assurance can be given that investors will realise a profit on their investment. Moreover, investors may lose some or all of their investment. The risks referred to below are not exhaustive. They relate to investment in a portfolio, the investment activities of the portfolio and the underlying funds in which they may invest or to which they may be exposed. References to a Portfolio below should be referred to in this context. The information herein does consequently not constitute an offer, or an invitation to offer, or a recommendation to enter into any transaction. You are privy to this information our capacity as a potential counterparty acting at arm s length. We are not acting as your financial adviser or in a fiduciary capacity in respect of this proposed transaction or any other transaction with you unless otherwise expressly agreed by us in writing. Potential investors should review the Private Placement Memorandum carefully and in its entirety and consult with their professional advisors before making an application for shares. The success of the fund and furthermore each Portfolio is significantly dependent on the investment advisors to each Portfolio as detailed in the Appendix. Their past investment performance may not be construed as an indication of the future results of an investment in the Fund or a Portfolio. Investments in a fund are generally medium to long term investments. The value of shares in the fund may go down as well as up and past performance is not necessarily a guide to future performance. Investments are traded as ruling prices and can engage in scrip lending. Forward pricing is used. Commission and incentives maybe be paid and if so, are included in the overall cost. Fluctuations or movements in exchange rates may cause the value of the underlying investments to go up or down. Share prices are calculated on a net asset value basis and brokerage, marketable securities, tax, auditors fees, amongst others, maybe be levied against the portfolio. PAGE 16