Friday, May 30, 2014

Introducing the Orbis Global Balanced Fund – Allan Gray

Like Allan Gray, Orbis has a limited range of funds which it believes addresses the needs of most investors. New funds are only introduced after very careful consideration and only after ensuring they meet a substantial client need. On 1 January 2013, Orbis launched a new global multi-asset fund – the Orbis Global Balanced Fund. The Fund has recently been registered for marketing South Africa and is now available via the Allan Gray offshore platform.  Click on link to read more 

Tuesday, May 13, 2014

Expect the Unexpected

The first few months of 2014 have proved to be fairly challenging for most investors. Entering the year, there was an almost universally held set of consensus views: equities would perform well,  bonds would suffer as yields rose and the US dollar would strengthen (against the yen and euro in particular) as the Federal Reserve pared back Quantitative Easing (QE). Most economists were optimistic about US prospects, expecting accelerating growth.

But there will always be surprises. The unforeseen escalation of events in the Ukraine as well as the prolonged bout of severe winter weather in the US reminds us of this. Such events have contributed to the ‘surprising’ outcomes in markets so far this year: equities have underperformed government bonds, the US dollar has been lacklustre and US growth has been weaker than expected. Other important factors have been less unexpected but have weighed on markets, including growing concerns around China’s economy and fragilities in several emerging market countries. To read more on this article click on this link

Market and economics commentary

Is it time to sell and go away?

Over the next few weeks, investors are likely to hear the old saying "sell in May and go away”, particularly since global markets have rallied so strongly over the past year (more so the past five years). The local JSE All Share Index is at record levels (in Rand terms), and so are the benchmark UK FTSE 100 (in Pounds), US S&P 500 and global MSCI World Equity indices (the latter two in US Dollar terms). In the UK, US and locally, investors are grappling with whether equities are overvalued; this is not a simple exercise. Investors need to consider future company profits, behaviour of other investors, and other financial variables such as interest rates. But there is no doubt that the economic backdrop in the US and UK is favourable for equities – inflation is low, growth is picking up and central banks are in no hurry to tighten their monetary policy.

Not all markets have done well

Importantly, however, a number of key global equity indices are nowhere near record highs. European equities, as represented by the Eurostoxx 50, are still 16% below the 2008 peak as the Global Financial Crisis and then the Eurozone debt crisis wreaked havoc with investor confidence and company earnings. The Eurozone’s economy is only now exiting its doubledip recession, and company earnings are slowly improving from a depressed base.

So far this year, Japan’s equities have lost more than 12%, after surging in 2013. But Japan’s Nikkei 225 Index is still 20% and 61% below the 2008 and 1989 peaks respectively. Japan’s government is keen on its corporate sector and to spur greater ownership of Japanese equities by local investors, potentially providing support going forward.

Emerging markets, as represented by the MSCI Emerging Markets Index, are 19% below the 2007 peak in US Dollar terms, and 8% in local currency terms (taking into account that many emerging market currencies, including the Rand, have fallen against the US Dollar). Over the past ten years emerging markets have been the star performer with their higher economic growth rates and, after the 2008 Global Financial Crisis, stronger government and corporate balance sheets. But over the past three years, emerging market growth rates have slowed, debt levels have climbed and companies have been unable to increase profits. Old structural shortcomings like political uncertainty and reliance on foreign capital have also resurfaced.

Locally, there are also pockets of potential value as the JSE’s resources and construction indices are still below the 2008 peak. Some JSE sectors that are closely linked to the struggling local economy – such as food producers and retailers – are currently trading below 2013 peaks. The market has largely been driven by the Rand-hedge mega-cap shares such as British American Tobacco, SABMiller and Richemont. More recently, interest-rate sensitive shares, such as banks, have rallied as the market has toned down its expectations for further rate hikes. To read more on this article click on the link

Investors’ in R5 Mandela coins ripped off

If you have paid thousands of rands for a R5 Mandela coin, which you bought as an investment, you are neither an investor nor a collector. You are a “victim”, Glenn Schoeman, the president of the South African Association of Numismatic Dealers, says.

A R5 circulation coin commemorating Nelson Mandela’s 90th birthday is worth R5. It contains no precious metal and it is not rare. But cunning dealers, exploiting Mandela’s iconic brand, have talked up a market around these coins, which are on sale for anything from a couple of hundred rand to R1 million.

“The biggest problem in numismatics [coin collecting] at the moment is the Mandela R5 coin. That’s where the bulk of the rip-off is occurring,” Peter Wilson, the chairman of the National Association of Numismatic Societies, says.

“We have been warning the market for some time: there is little that’s rare about the Mandela R5 coin. And, no, it is not an investment,” he says.

People have been hoarding the coins since they came into circulation, Wilson says.

About 22 million R5 Mandela coins were minted in 2008, according to Hlengani Mathebula, the head of group strategy and communications at the South African Reserve Bank (SARB). The coins are manufactured by the South African Mint, which is a subsidiary of the SARB. The mintage is confirmed by Hern’s Handbook of SA Coins. 

“The commemorative Mandela circulation R5 coin that was issued in 2008 to commemorate former president Nelson Mandela’s 90th birthday is worth R5, or whatever a buyer is willing to pay for it,” Mathebula says.

He says the SARB issues “commemorative circulation coins” as part of its production of currency – to commemorate an event – and such coins are made available to the public at face value. “Such coins are always minted in large quantities,” Mathebula says.

These are made up of coins destined for circulation and proof coins, primarily meant as momentos and intended for collectors. To read more click link below