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16 May 2012 15:18

Be wary of basing investment decisions on economic data

RE:CM believes South African equity is priced around fair value to expensive.

Investors should be wary of basing investment decisions too heavily on the plethora of economic data they are exposed to on a daily basis, such as GDP growth rates, inflation data, manufacturing and production numbers, various confidence indexes, rating agency and economist outlooks. 

Research has disproved the existence of a positive relationship between real economic growth and stock market returns.

Research by Dimson, Marsh and Staunton, academics at the London School of Business, analysed the relationship between real GDP growth per capita and real stock returns of 83 countries from 1972 to 2009.

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14 May 2012 09:22

Digging for value in a two-faced market

We have high conviction in the likes of Anglo, Sasol and Billiton at these share prices.

There is a strong school of thought and much commentary in the financial press that global investment sentiment is currently bullish and stock markets are expensive. We would contend that it is difficult to make this assertion categorically and especially when one looks at the very attractive valuations in the unloved parts of the market. However, it is clear to us that some stocks have become extremely expensive and we anticipate very poor medium term returns for investors that are chasing the darlings of the market. Domestic retail stocks provide very good examples of how much the stock market is currently prepared to pay up for earnings visibility and growth over the immediate future. Given the massive discrepancy in sentiment and valuations for different stocks, we continue to caution investors against making an assessment as to whether the stock market is over or under-valued at an index level.

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10 May 2012 03:25

Down we go

Is there a risk commodity prices could slide?

Down we go… the London FTSE mining sector had fallen 17% from its 3 February peak, versus a typical sell-off of 26% in the last 10 years. The FTSE/JSE mining sector fell 13% from its own recent peak. According to Barclays Capital, this was due to “rising concerns over the Chinese economy and its construction industry in particular, a cost-laden results season, with somewhat disappointing dividend growth and caution writ large in the outlook statements”. The authors added: “However, with Chinese inflation at 3,2% and most commodity prices, bar copper, about 10% above marginal cost of production, we believe we’re not far from the bottom.

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04 May 2012 09:36

Should listed property be part of your retirement savings?

Craig Gradidge looks at the benefits of adding it to you portfolio.

JOHANNESBURG - Proponents of equity investing over the long term point to the fact that it is the best performing asset class after tax and inflation. This is certainly true for discretionary investments, but lacks substance when it comes to investments within a retirement product such as a retirement annuity, preservation fund or living annuity fund. Local property returns are NOT taxed in these vehicles, and as a result have delivered equity beating returns (at significantly lower levels of risk) over the long term.

When it comes to structuring a portfolio for retirement savings we believe that investors can benefit from a higher exposure to listed property.

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03 May 2012 16:14

Investment into Africa accelerates

African GDP forecast to grow between 4-5% pa in next decade and FDI into Africa to reach $150bn by 2015.

JOHANNESBURG - Growing optimism and confidence among international and African investors has led to significant inward investment into Africa over the last decade according to Ernst & Young’s second African Attractiveness Survey. The report combines an annual analysis of investment into Africa since 2003, with a survey of 505 global executives on their views about how and where investment will take place in the next decade and predicts that Africa is poised to enter the premier league of investment destinations.

There was strong growth in the number of new foreign direct investment (FDI) projects in Africa in 2011 with project numbers almost up to levels last seen in 2008.

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