Investec Euro Stoxx50 Digital Plus Presentation. October 2018

Transcription

1 Investec Euro Stoxx50 Digital Plus Presentation October 2018

2 Investec Euro Stoxx50 Digital Plus A 3.5-year equity investment linked to the performance of the Euro Stoxx50 Index. The return will be paid to the investor in Rand therefore no currency risk. Earn a minimum 70% digital return in ZAR if the Index is flat or positive at maturity, plus unlimited upside above 70%. Reference Index: Euro Stoxx50 (SX5E Index). JSE code: SPIB % downside protected at maturity in ZAR provided the Index does not end down more than 40%. The Digital Plus ESP is a credit linked ESP where the investor takes credit risk on both Investec Bank Limited ( IBL ) and Standard Bank of SA ( SBK ). IBL is the product supplier, liquidity provider, issuer and market maker. The ESP is a listed instrument on the JSE and can be purchased via a stockbroking account using Rand. Minimum investment amount is from R cash and increments of R Daily liquidity in normal market conditions. Investec makes an active daily market in the investment on the JSE with a bid to mid-spread of 1%. 2

3 What is the pay-off profile at expiry in Rand? Return 200% Uncapped 190% 180% 170% 160% 70% Digital Return 150% 140% 130% 120% 110% EuroStoxx50 Index 100% 90% 40% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200% 80% 70% 60% 50% 40% 3

4 What returns can investors expect? Index returns at maturity* Initial Rand amount invested Digital Plus ESP investment value at maturity 78% R R % R R % R R % R R % R R * Theoretical returns for illustrative purposes 4

5 Euro Stoxx50 commentary The Euro Area is the second largest economy in the world. Of the 19 member states it includes, the biggest are: Germany (29% of GDP, France (20%), Italy (15%) and Spain (10%). On the expenditure side, household consumption is the main component of GDP and accounts for 54% of its total use, followed by gross fixed capital formation (21%) and government expenditure (20%). Exports of goods and services account for 47 percent of GDP while imports account for 43 percent, adding 4 percent of total GDP. The European Central Bank has called an end to its quantitative easing programme by the end of 2018, showing confidence in the Eurozone economy Per the Graph below the GDP annual growth rate has recovered to over 2% per annum after the dual shock of both the financial and Greek crisis. EU GDP annual growth rate Source: Tradingeconomics.com Eurostat 5

6 Euro Stoxx50 returns Data source: Bloomberg 6

7 Euro Stoxx50 country exposure As of 4 Sep 2018 (%) Country Weights % France 38,05% Germany 31,85% Netherlands 8,92% Spain 8,68% Italy 4,51% United Kingdom 3,2% Belgium 2,6% Finland 1,16% Ireland 1,03% Data source: Stoxx 7

8 Euro Stoxx50 Top 10 companies As of 4 Sep 2018 (%) Name ISIN Weight TOTAL ORD FR % SAP SE ORD DE % SIEMENS ORD DE % SANOFI-AVENTIS ORD FR % LVMH MOET HENNESSY LOUIS VUITT FR % ALLIANZ SE ORD DE % ASML HOLDING ORD NL % UNILEVER NV NL % BAYER AG DE000BAY % BASF SE ORD DE000BASF % Data source: Bloomberg 8

9 Euro Stoxx50 industry sector weightings As of 4 Sep 2018 (%) Sector Weights % Financials 18,90% Industrials 14,12% Consumer discretionary 11,66% Consumer staples 10,94% Healthcare 10,65% Information technology 9,2% Energy 7,9% Materials 6,15% Utilities 4,88% Other 5,60% Data source: Stoxx 9

10 How would the Digital Plus have performed in the past? 3,603 rolling 3.5 year periods for the past 14 years Digital would have triggered 59.12% historically Investors would have received 70% return in 50.03% of the time Investors would have received more than 70% return in 9.09% of the time Capital returned 38.93% of the time Capital losses would have been incurred in 1.89% of the time and only in the 2008 Financial crisis 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Distribution of Returns 50.03% 38.93% 9.09% 1.89% Negative returns Returned Capital 70% Digital Greater than 70% Data source: Bloomberg 10

11 Euro Stoxx50 performance vs. Digital Plus performance 3063 rolling 3.5 year periods from 2004 to date have been tested 3.5yr rolling returns % % 50.00% 0.00% % % Eurostoxx50 Digital Returns Data source: Bloomberg 11

12 What dividends am I forfeiting by investing in this product as opposed to the Index? Sygnia Euro Stoxx50 tracker Current 12m Dividend Yield 2.18% Less 20% tax 0.55% Net Dividend 1.74% Compounded for 3.5 years 7.23% Dividend yield of the Sygnia Euro Net dividend forfeiture is 7.23% over the 3.5 years ETF trackers provide no capital protection, Where the the Digital Plus, offers geared upside and capital protection Data source: Bloomberg 12

13 What tax will investors pay? The information provided in this brochure is general information and should not be construed as tax advice. Taxation legislation and its interpretation may change. For as long as an investor is the holder of an ESP, they will be the owner of ETFs. Section 9C of the Act deems receipts and accruals arising from the disposal of ETFs to be of a capital nature if the taxpayer was the owner of the equity share for a continuous period of at least 3 years immediately prior to the sale. The tax consequences for investors who elect to sell their ETFs before a period of 3 years has elapsed will be dependent upon individual circumstances and any profit realised from the sale may be subject to Income Tax/CGT. It is recommended that prospective investors seek independent professional legal, tax and accounting advice and consider the investment in the light of the Investor s particular circumstances. No responsibility is accepted by IBL for the treatment of any court of law, tax, banking or other authority in any jurisdiction of the investment and no undertaking, warranty or representation is given with regard to the outcome of any such investment. All opinions, statements and analysis expressed are based on information, which was current at the time of writing and from sources, which ISP believes to be authentic and reliable. 13

14 What fees are included? All distribution fees, including JSE listing costs and licensing costs, have been priced into the product and will not affect the investor s return. That is, investors will receive back R170 for each R100 they invest should the index be flat or slightly positive. A distribution fee of 1.00% (inclusive of VAT) will be paid in year 1, 2 and 3 annually in advance to the Financial/Investment Professional. Important dates Closing date Trade date Listing date Maturity date 19 November November December May

15 Financial Services Board ( FSB ) licence categories FSB Category 1 ( CAT1 ) and Category 2 ( CAT2 ) licence holders qualifying criteria to write structured products: Listed products are exempt under the Financial Advisory and Intermediary Services Act ( FAIS ), however financial advisors/stockbrokers/wealth managers should be aware of their FAIS compliance responsibilities under the Johannesburg Stock Exchange( JSE ) rules for listed products; Where advice is being given, financial advisors/stockbrokers/wealth managers should ensure that they understand the underlying instruments and are able to provide advice on a "look through" basis; and The onus is on the financial advisor/stockbroker/wealth manager to ensure that they have the appropriate license to advise on the Digital Plus CAT1 license holders 1.8 Securities and Instruments: Shares 1.11 Securities and instruments: warrants, certificates and other instruments acknowledging, conferring or creating rights to subscribe to acquire, dispose of or convert securities and instruments referred to in subcategories 1.8, 1.9 and Securities and instruments: Derivative instruments excluding warrants and 1.14 Participatory interests in CIS s (Collective Investment Schemes) CAT2 license holders 2.5 Securities and instruments: Shares 2.8 Securities and instruments: warrants, certificates and other instruments acknowledging, conferring or creating rights to subscribe to acquire, dispose of or convert securities and instruments referred to in subcategories 2.5, 2.6 and 2.7 above 2.10 Securities and instruments: Derivative instruments excluding warrants and 2.11 Participatory interests in CIS s (Collective Investment Schemes) 15

16 Contact us Please contact one of our product specialists for further information Brian McMillan Japie Lubbe Carlo Accolla Andri Joubert Recent accolades Africa Structured Products & Derivatives Awards 2017 Best performance in South Africa 2016 & 2017 Best distributor in South Africa 2016 & 2017 Best House Africa 2017 Deal of the Year

17 Disclaimer The information contained in this communication is for informative purposes and is not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. As product supplier, Investec is not in a position to have regard to the specific investment objectives, financial situation or particular needs of any specific recipient. The material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Investors should seek their own independent professional advise regarding the suitability of this ESP for their own particular investment purposes All illustrations, forecasts or hypothetical data are for illustrative purposes only and are not guaranteed. The sender accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this communication. Investec does not make representation that the information provided is appropriate for use in all jurisdictions or by all investors or other potential investors. Parties are therefore responsible for compliance with applicable local laws and regulations. Prospective investors should be fully aware of the risks involved in trading investment related products. Profits and benefits are dependent on the performance of underlying assets and other variable market factors and are not guaranteed. This product is not sponsored, endorsed, sold, or promoted by the ETF or indices, as specified herein, or the relevant ETF sponsor, being the corporation or other entity that (a) is responsible for setting and reviewing the rules and procedures and the methods of calculation and adjustments, if any, related to the relevant ETF and (b) announces (directly or through an agent) the level of the relevant ETF on a regular basis. No ETF sponsor makes any representation whatsoever, whether express or implied, either as to the results to be obtained from the use of the ETF and/or the levels at which the ETF stands at any particular time on any particular date or otherwise. No ETF or ETF sponsor shall be liable (whether in negligence or otherwise) to any person for any error in the ETF and the ETF Sponsor is under no obligation to advise any person of any error therein. No ETF sponsor is making any representation whatsoever, whether express or implied, as to the advisability of purchasing or assuming any risk in connection with entering into any transaction in respect of this product. Neither Investec nor the investor shall have any liability to the other for any act or failure to act by the ETF sponsor in connection with the calculation, adjustment or maintenance of the ETF. Investec has no affiliation with or control over the ETF or ETF sponsor or any control over the computation, composition or dissemination of the indices. Although Investec will obtain information concerning the indices from publicly available sources it believes reliable, it will not independently verify this information. Accordingly, no representation, warranty or undertaking (express or implied) is made and no responsibility is accepted by Investec as to the accuracy, completeness and timeliness of information concerning the indices. Corporate and Institutional Banking, a division of Investec Bank Limited. Reg. No. 1969/004763/06. An Authorised Financial Services Provider (FSP 11750) and registered Credit Provider (NCRCP9). A member of the Investec Group. Investec EM Digital Plus