braving the stock market Vimal Chagan acsis chief investment officer

Transcription

1 braving the stock market Vimal Chagan acsis chief investment officer

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3 what is equity?

4 what is equity? share certificate? another price in the newspaper? pension fund / retirement annuity / unit trusts / endowment policies?

5 what is equity? owned by shareholders profits/losses make a direct impact on share prices voting rights attached to shares shareholders stand behind lending banks and bond holders

6 what is equity?

7 what is equity? listed (JSE, NYSE, FTSE) private (Pty, CC, partnership) unlisted (BJM, PSG, Saasdaq)

8 what is equity? shares of public companies are generally listed on an exchange examples of exchanges JSE Securities Exchange New York Stock Exchange NASDAQ London Stock Exchange Deutsche Börse Euronext Paris / Brussels / Amsterdam Australian Stock Exchange Shanghai Stock Exchange

9 what is equity? JSE facts founded in 1887 active floor closed in 1996 JSE now fully automated (order driven, automated trading) source: Johannesburg Stock Exchange

10 why is equity important? historically provides higher growth than other traditional asset classes equity price appreciation should outpace inflation comfortably business profits should be above borrowing costs to be successful

11 why is equity important? Value of R100 invested in December ,000,000 1,000,000 Equities Bonds Cash Inflation 6,634, ,000 10,000 38,806 17,671 10,045 1, Dec-24 Dec-27 Dec-30 Dec-33 Dec-36 Dec-39 Dec-42 Dec-45 Dec-48 Dec-51 Dec-54 Dec-57 Dec-60 Dec-63 Dec-66 Dec-69 Dec-72 Dec-75 Dec-78 Dec-81 Dec-84 Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 source: Firer & McLeod and I-Net

12 source of returns dividends cash scrip dividend capital appreciation buying / selling to another investor buybacks by company

13 the riskiness of investing SA calendar year returns ( ) equity bonds cash inflation proportion of negative years 23% 19% 0% 12% source: Firer & McLeod and I-Net

14 the riskiness of investing 150 SA calendar year returns ( ) % returns equity bonds cash inflation asset classes source: Firer & McLeod and I-Net

15 a risk perspective action risk historical average return historical average return (after inflation) tax shares very risky 16.63% 10.66% CGT bonds risky 8.07% 2.09% interest cash not risky 6.75% 0.78% interest source: Firer & McLeod and I-Net

16 years when the equity market fell 0% % -10% -15% -20% -25% -30% source: Firer & McLeod and I-Net

17 equity markets rise in value most of the time source: Firer & McLeod and I-Net

18 equity (JSE) volatility Graph Of JSE All Share Volatility 60% 50% 40% Volatility 30% 20% 10% 0% source: I-Net

19 equity returns 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Total Ret Total Ret Real Ret Real Ret Aver GDP (Q-Q) Aver GDP (Q-Q) source: Firer & McLeod and I-Net

20 real returns source : Andisa Securities

21 equity performance drivers source : Andisa Securities

22 negative returns source : Andisa Securities

23 why invest overseas?

24 why invest overseas? offshore / international / global

25 why invest overseas? reduce risk diversification different investment cycle different economic cycle industries / securities not available locally correlation stock concentration sector concentration increase expected returns

26 diversification different economy different currency different stock markets different industries globalisation

27 effects of globalisation global companies different economy different currency different stock markets different industries

28 the role of correlation 85% Local + 15% International Equities Local Assets 100% Equities Expected Return 100% Bonds Expected Volatility (%) source : I-Net, MSCI

29 correlations with the JSE 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% United States United Kingdom Japan MSCI World MSCI Emerging Markets source : I-Net, MSCI

30 correlations global capital flows correlations in normal markets these correlations normally break down in times of market crisis

31 JSE versus FTSE correlation should increase over time Anglos plc BHP Billiton plc SAB Miller plc Compagnie Financière Richemont SA Sasol top 5 shares = 37% of JSE international shares = 32% of JSE

32 equity returns 35% 30% JSE All-Share Index MSCI World Index (Rand) 25% 20% 15% 10% 5% 0% -5% source: Firer & McLeod, I-Net and MSCI

33 global equity markets source: FactSet

34 in parting.. legislation allowances taxation investment instruments amnesty Belgium, US, SA

35 accessing the stock market direct, stockbroker, unit trusts, Satrix, endowments, RA s.. active / passive / quants / value / growth / high dividend yield / GARP / small cap / contrarian / large cap financial advisor..

36 thank you