The Weekly Focus. A Market and Economic Update 10 September 2018

Transcription

1 The Weekly Focus A Market and Economic Update 10 September 2018

2 Contents Newsflash...3 Market Comment... 3 Other Commentators... 5 Rates...6 STANLIB Money Market Fund... 6 STANLIB Enhanced Yield Fund... 6 STANLIB Income Fund... 6 STANLIB Extra Income Fund... 6 STANLIB Flexible Income Fund... 6 STANLIB Multi-Manager Absolute Income Fund... 6

3 Newsflash The JSE Financial & Industrial Index is hurting, down -9.3% in 2018 near its low, which was recorded in June. Some of the big rand hedges haven t shielded us against the weak rand. Market Comment With many traders and investors returning to their desks in the northern hemisphere last week, after their summer holidays, markets fell back a bit as technology shares experienced some selling on the back of increased scrutiny from Congress. Facebook fell - 8% on the week. The S&P 500 Index fell around -0.9% last week to be up +7.6% in The Consumer Discretionary sector is now the clear leading sector with a 2018 return so far of +17.1%, followed by IT s +15.2% then Health Care s +11.6%. Consumer Staples remains negative at -4.7%. The Emerging Market storm continued, with currencies falling (rand -3.6% last week to a two-year low) and shares struggling, especially in Asia, with the Hang Seng Index in Hong Kong at a 2018 low. The rand ended August at versus today s to the dollar. The dollar is at a fairly crucial level now versus the euro because it is testing its lower or stronger boundary of the past 3.5 months (see graph below). Hopefully it will hold here, rather than strengthen further, because a stronger dollar probably means more pain for emerging markets. Source: I-Net Bridge Last week on the JSE ALSI, Aspen fell -8.4% after its results, although it appears to have lost about R1bn on currency translation, ironically because of the strong rand in the first six months of this year. MTN fell another -16% on more victimisation from Nigerian authorities. Bidvest fell -7.8% after a good run, while Naspers fell -3.5% on the back of continued selling in Tencent. Santam rose by +5.7%. The ALSI is back into negative territory for 2018 at -2.4%, including dividends after being flat this time last week. The SA Listed Property Index fell back a bit too last week to be -19.7% in 2018 from -19.1% last week, as bond yields rose on the weak rand. The All Bond Index return is down to +3.7% in 2018 from +4.5% last week.

4 While the JSE Resources Index has benefited from the weak rand in 2018 and from the strong cash flows of the big miners, not to mention the strong oil price and Sasol s big run, plus Mondi s good results, the JSE Financial & Industrial Index is hurting, down -9.3% near its low, which was recorded in June (see graph below). Source: I-Net Bridge Despite the rand s -23% decline so far in 2018 versus the dollar, -18.5% versus the euro, - 18% versus the pound and -12% versus the Aussie dollar, British American Tobacco shares are down -13.2% in rands this year down along with other Consumer Staple shares in the US. Also Anheuser-Busch Inbev is down -1.4% and Naspers is -13%, so some of the big rand hedges on the JSE have performed poorly despite the weak rand. Richemont is +17.5%, meaning it is slightly down in euro terms. Bidcorp is up +21% in the past month, but is still only +6.9% in MTN is down -45% so far in 2018 while Trencor is down -24%, so these two rand hedges have been dismal so far - as has Glencore, which is -11.9%...in rands nogal! Plus our retail shares have mostly had shocking offshore results, especially of course Woolies in Australia and fast-food holding company Famous Brands in the UK. Their rand hedge qualities have bitten hard, rather than helping, because of losses in Aussie dollars and pounds being translated back into weaker rands. Thank goodness for the higher oil price, with Sasol +34% and BHP Billiton +17.7%. Anglo American is +9.6%, while Mondi is +26%. The JSE Banks Index is -3.5% in 2018, just for info; of course it is usually a bit weaker when the rand is weaker, because the 10-year bond yield is higher. The SA government 10-year bond yield rose to 9.25% last week (price fell) as the emerging market storm raged on, the highest yield since hitting 9.45% last November ahead of the crucial ANC election. If one looks back into past Emerging Market storms, one realises they do also create great opportunities, because assets/currencies etc. get priced, often unfairly, at crisis levels. After all, why should the rand tumble because Turkey and Argentina have badly mismanaged their financial issues? So on this basis, taking profits on some rand-based offshore funds (and possibly buying some STANLIB Bond Fund) seems to make some sense at this stage. Of course, it s impossible to call the low for the rand, so perhaps a phased approach is best selling some now, some tomorrow etc.

5 Other Commentators US Market Analyst, Elaine Garzarelli Her quant model remains bullish at 83.5%, so she expects US stock market corrections to be limited to 4-7%. Fair value for the S&P 500 Index is 3,150, about +10% higher than current levels. US economic data remains firm and there are several positive supports for the economy. S&P 500 earnings are strong, unemployment claims remain low and the US savings rate is up to 6.8%. High savings supports consumer spending, which is being buoyed by good earnings, high consumer confidence and higher share/unit trust portfolios. Garza still expects inflation to remain modest, even as economic activity improves. The environment is great for manufacturers and manufacturing growth has been solid. State and local construction spending has been growing rapidly for the past year. BCA Research BCA continues to have a constructive view of the business, market and policy cycles in the US, so global investors should overweight US equities relative to equities in other regions. However the environment is sufficiently risky to inspire caution; hence keep an equal weight or neutral weight in equities, underweight bonds and overweight cash. Paul Hansen Director: Retail Investing

6 Rates These rates are expressed in nominal and effective terms and should be used for indication purposes ONLY. STANLIB Money Market Fund Nominal: 6.50% Effective: 6.70% STANLIB is required to quote an effective rate which is based upon a seven-day rolling average yield for Money Market Portfolios. The above quoted yield is calculated using an annualised seven-day rolling average as at 7 September This seven- day rolling average yield may marginally differ from the actual daily distribution and should not be used for interest calculation purposes. We however, are most happy to supply you with the daily distribution rate on request, one day in arrears. The price of each participatory interest (unit) is aimed at a constant value. The total return to the investor is primarily made up of interest received but, may also include any gain or loss made on any particular instrument. In most cases this will merely have the effect of increasing or decreasing the daily yield, but in an extreme case it can have the effect of reducing the capital value of the portfolio. STANLIB Enhanced Yield Fund Effective Yield: 7.81% STANLIB is required to quote a current yield for Income Portfolios. This is an effective yield. The above quoted yield will vary from day to day and is a current yield as at 7 September The net (after fees) yield on the portfolio will be published daily in the major newspapers together with the all-in NAV price (includes the accrual for dividends and interest). This yield is a snapshot yield that reflects the weighted average running yield of all the underlying holdings of the portfolio. Monthly distributions will consist of dividends and interest. Interest will also be exempt from tax to the extent that investors are able to make use of the applicable interest exemption as currently allowed by the Income Tax Act. The portfolio s underlying investments will determine the split between dividends and interest. STANLIB Income Fund Effective Yield: 8.21% STANLIB Extra Income Fund Effective Yield: 7.69% STANLIB Flexible Income Fund Effective Yield: 6.74% STANLIB Multi-Manager Absolute Income Fund Effective Yield: 7.30% Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. A schedule of fees and charges and maximum commissions is available on request from the company/scheme. CIS can engage in borrowing and scrip lending. Commission and incentives may be paid and if so, would be included in the overall costs. The above quoted yield will vary from day to day and is a current yield as at 7 September For the STANLIB Extra Income Fund, Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. The historical yield over the last 12 months is reported for the STANLIB Multi-Manager Absolute Income Fund.

7 Disclaimer The price of each unit of a domestic money market portfolio is aimed at a constant value. The total return to the investor is primarily made up of interest received but, may also include any gain or loss made on any particular instrument. In most cases this will merely have the effect of increasing or decreasing the daily yield, but in an extreme case it can have the effect of reducing the capital value of the portfolio. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. An investment in the participations of a CIS in securities is not the same as a deposit with a banking institution. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from STANLIB Collective Investments (RF) (Pty) Ltd (the Manager). Commission and incentives may be paid and if so, would be included in the overall costs. A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for these portfolios. Forward pricing is used. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. TER is the annualised percent of the average Net Asset Value of the portfolio incurred as charges, levies and fees. A higher TER ratio does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER cannot be regarded as an indication of future TERs. Portfolios are valued on a daily basis at 15h00. Investments and repurchases will receive the price of the same day if received prior to 15h00. Liberty is a full member of the Association for Savings and Investments of South Africa. The Manager is a member of the Liberty Group of Companies. As neither STANLIB Wealth Management (Pty) Limited nor its representatives did a full needs analysis in respect of a particular investor, the investor understands that there may be limitations on the appropriateness of any information in this document with regard to the investor s unique objectives, financial situation and particular needs. The information and content of this document are intended to be for information purposes only and STANLIB does not guarantee the suitability or potential value of any information contained herein. STANLIB Wealth Management (Pty) Limited does not expressly or by implication propose that the products or services offered in this document are appropriate to the particular investment objectives or needs of any existing or prospective client. Potential investors are advised to seek independent advice from an authorized financial adviser in this regard. STANLIB Wealth Management (Pty) Limited is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 37 of 2002 (Licence No. 26/10/590). Compliance No.: Z2B Melrose Boulevard, Melrose Arch, 2196 P O Box 202, Melrose Arch, 2076 T: (SA Only) T: +27 (0) E: contact@stanlib.com Website: STANLIB Wealth Management (Pty) Limited Reg. No. 1996/005412/07 Authorised FSP in terms of the FAIS Act, 2002 (Licence No. 26/10/590) STANLIB Collective Investments (RF) (Pty) Limited Reg. No. 1969/003468/07