Indholdsfortegnelse for 11/5/2020 i Finweek - English

on 21 October, the Orlando electricity substation in Johannesburg went down, causing a widespread power outage in the city that affected several areas. The cause wasn’t clear. As it seems to be the best source of updates when it comes to municipal problems, residents scoured the City of Joburg’s Twitter feed for news on the cause and the estimated time of repair. Power was eventually restored approximately six hours later. By power outage standards, this is a walk in the park compared to durations of over 24 hours – which also happened during that week in other suburbs of Johannesburg. These severe power outages (not related to load shedding) have become an unacceptably regular occurrence in Joburg, and the ripple effect this has is immense. One being that residents were…

EOH, a South African-based technology and communications technology service provider in Africa, was once the market’s favourite in 2015 when it tested an all-time high at 18 000c/share. But the bullish momentum turned bearish the following year, dropping significantly in 2017 after news of unethical practices surfaced. In 2019, EOH blacklisted 50 business partners in a corruption crackdown. The group appointed an auditing firm to probe the malfeasance. This after Microsoft’s decision to terminate its relationship with EOH after a whistleblower lodged a complaint with the US Securities and Exchange Commission over a dodgy tender involving a software licensing agreement with the SA department of defence. Its share price fell to 465c/share – last seen in 2006. The share price has been trading sideways after breaching the resistance trendline of…

in the 22 October issue of finweek, I wrote about how I am trying my hand at trading local equities for the first time in over a decade. Some aspects of my index trading have helped (discipline and risk management), but stocks are more volatile and need a different approach to my index trading methods. What I didn’t expect was how spending the extra time looking at equity charts for buy and sell signals would get me thinking about my long-term investment portfolio. I have written before about how, as long-term investors, the only part of the entire investment process we really control is what to buy and then, most importantly, what price to pay. This is about valuations and buying great, quality companies at great prices. After buying the…

the past ten months have arguably been among the most problematic economically and financially since the Great Depression that followed the 1929 stock market crash. And if ever there has been a need to go back to basics, it’s now. But that said, it’s not always easy identifying the best strategies, funds and/or stocks to emerge from quagmires, such as the present one. Conversely, there is much to be said for the superb advice from the likes of Warren Buffett, such as knowing what you’re investing in, identifying securities and products that will stand the test of time, and keeping a long-term mindset. Perhaps the most predominant message emanating from portfolio managers and analysts this quarter is the need to maximise your offshore exposure. Not only are domestic earnings and…

regrettably, the South African industry has a history of brokers that sell products, where the focus was presumably more on commission than on necessarily helping clients. That said, it would be short sighted to discard the value of advice purely based on that perception, and then fly solo. Investors can actually be more comfortable with advisers. In recent years, regulators have been working to make the financial services industry more credible and passed an array of legislation to ensure that customers are not just treated fairly, but that they also understand the services they are paying for. However, the real solution is finding a financial adviser that you feel adds value. There are numerous studies, which show that investors who use advisers perform better than those who don’t, even after…

over the past few weeks there has been a considerable improvement among the top 100 shares on the JSE – measured by market cap. This is reflected in the fact that 51% of the shares are currently lying above their200-dayexponential moving averages (EMAs), which means that the bull has now asserted itself for the first time this year, even though it has only just managed to do so. In October, only 30% of these shares were trading above their 200-day EMAs. How bad things have been is evident from the fact that only 4% of the top 100 was lying above their 200-day EMAs during the difficult lockdown in March and April. There have been major changes on the list of the strongest shares after mining counters, especially gold and…

sport is often a microcosm of broader patterns in society. Sport can also say something about the economic incentives in society. Take the relationship between a country’s inequality and its economic performance. Most of us would argue that inequality hurts growth; that a highly unequal society inhibits the productive potential of those at the bottom of the income distribution. Some, though, would say that inequality, even severe inequality, is a necessary condition of economic freedom: those with the best ideas or best talents must rise to the top and be rewarded for their skills and their appetite for risk – the incentive effect. Identifying just which of these two effects are most important, though, is a precarious exercise, full of knotty measurement issues. However, what we can measure quite accurately…

curro, the private education company controlled by PSG, saw its share price slide by more than 75% over the past five years. The company, among others to reduce debt, announced a R1.5bn rights offer to shareholders in June, which was 85.3% subscribed for. PSG underwrote the offer and took the balance of the new shares, pushing its holding in the company to 60% from 55.4% prior to the offer. Outlook: The share price is regaining upside within its major bear trend – a sign that buyers are trickling in. This upside commenced in June when the rights offer was announced. On the charts: Curro is points away from the resistance trendline of its long-term bear trend. Breaching that trendline would mark the end of pessimistic sentiment and a gain in…

2020 has been many things, none of them what we expected. I remember hearing about this new coronavirus in mid-January. Early reports were certainly worrisome and I was keeping half an eye on developments in China. Then, in early March, on the day the first case was announced in South Africa, I was in Durban doing a presentation on the possible impact the virus – which we now know as Covid-19 – could have on local and global markets. We’d changed the topic of the presentation a few days earlier, as the magnitude of the virus became apparent. But even then I totally underestimated the actual impact. But I did make two predictions at that Durban event. Firstly: the impact on markets would be real, with a drop of over…

a fund well worth considering by those looking for offshore exposure is the Ninety One Global Strategic Managed Feeder Fund, managed out of London by Philip Saunders and Iain Cunningham. The advantages of credible offshore multi-asset funds, of course, are that they can benefit from a broad international opportunity set and spread an investor’s exposure by asset class, credit quality and currency to provide more stable returns. The Ninety One Global Strategic Managed Feeder Fund launched in September2003 and has R4.2bn under management. The fund has notched up a solid performance record, namely an annualised 14.5% return over ten years, 10.01% over five years and 18.1% over one year. On a quarterly basis, it turned in 7.3% in the first quarter and 10.8% in the second quarter of this year.…

for many South African investors, the thought of investing in other emerging markets (EMs) may seem counterintuitive. Some would argue that you have enough EM risk, already living and earning income in one. But there are many compelling reasons to consider actively managed exposure to EMs outside of South Africa. Take advantage of long-term trends that are not apparent in SA More than a decade after we launched our specialist EM equity funds back in 2007, we remain bullish on the long-term prospects for EM equities. The key structural drivers supporting EM growth are still in place and we continue to find attractive stock-picking opportunities in multiple geographies. The EM universe is full of businesses that can take advantage of growth tailwinds that are absent from the developed world, and…

in the current market conditions, offshore investing has become vital in diversifying your investment portfolio, as it offers an opportunity to adequately benefit from a greater investment universe. When you have offshore exposure, it means that you’re spreading your risk – or diversifying – geographically. Diversification across different asset classes, asset managers, geographical locations or investment strategies means that at any point in time you have exposure to an element in your portfolio that, when optimally combined, should act in a complementary way. Your portfolio is therefore betterable to withstand fluctuating market conditions, creating smoother returns over the long run. But investing offshore can be a difficult landscape to traverse with various ways to do so. Some of the common approaches are through opening an offshore bank account, or investing…

BALWIN PROPERTIES Residential boost Balwin Properties’ results show a tough six months to 31 August as it struggled to operate during the lockdown and headline earnings per share slumped by 56%. The company did, however, declare a dividend of 19.6c/share, showing confidence from the board as far as cash flow is concerned. Balwin also finds itself well positioned with the surge in demand for home sales in the market below R1.5m on the back of the decades-low prime lending rate of 7%. The company has several estates underdevelopment and while some of them are at higher price points, there has been improving demand and I think Balwin will likely see continued increases in sales. It will manage this increased demand by ramping up construction and while fora long time I…

it’s not often that Mick Davis, knighted by the UK’s queen in 2015, has been called an asshole; at least, not to his face. Enter Bernard Swanepoel, the former CEO of Harmony Gold, who first bumped into Davis during the 1980s, early in their respective careers. “When I first met you at Genmin [General Mining], I thought you were an asshole,” said Swanepoel, who was about to pose online audience questions during the Joburg Indaba conference he convenes, and at which Davis was a star turn. “Then I got to know you, and I realised you were a clever asshole.” If Davis was taken aback, it didn’t show, maintaining to a tee his reputation as a cool customer. A former colleague recalls a work-related dinner with Davis that was carried…

The glaringly obvious predicament with the remote workforce is the lack of control over working hours and the value of the work done, says Webber Wentzel partner Dhevarsha Ramjettan. She says considering the financial implications of overtime, the employer is well within their rights to implement policies and procedures that govern and are implemented solely for the purpose of monitoring the overtime work. “Policies can be implemented that only allow for overtime to be paid out where it has been approved beforehand by the employee’s manager,” she says. Yolandi Esterhuizen, compliance manager at Sage Africa & Middle East, says the wage rate for overtime is set at either one and a half times the normal rate or twice the normal rate, depending on whether the overtime was worked on a…

Bea @lavafairys Whoever put the “s” in lisp is wrong for doing that. Vamp Capital @RampCapitalLLC Is it selfish to only care about my own stocks? Pinky Sithole @PinkySithole17 202 days of lockdown. I remember cupcake lying to us that it would be 21 days. Kristia van Heerden @kristiavh 21 days was the deposit. This is the balloon payment. Colin Barrett @ColinBarrett82 Massive respect to everyone still experiencing time as a linear sequence. Mark @TheCatWhisprer One day I hope to be wealthy enough to not do a doubletake every time I see abandoned furniture on the side of the road. Jim Acosta @Acosta Obama at event for Biden: “Can you imagine if I had a secret Chinese bank account? … They’d call me Beijing Barry.” Abbi Crutchfield @curlycomedy I did…

“FOR ONCE, WE CAN TALK ABOUT AN SOE WITHOUT TALKING ABOUT BAILOUTS.” —Public enterprises minister, Pravin Gordhan, applauded Transnet for posting “excellent results”. Transnet reported a 1.3% increase in revenue to R75.1bn and a net profit of R3.9bn for its financial year to the end of March 2020. This was marginally below the revenue growth of 1.6% it posted for the previous financial year, but it came largely from tariff increases for port and rail users, which averaged 2.9% for its latest reporting period. The company’s auditors gave Transnet a qualified audit opinion. “Do we just unilaterally stand down and not choose to use the same tools that Republicans did in the majority?” —Chris Murphy, a Democratic senator representing Connecticut, following the confirmation of Amy Coney Barrett as justice of…

one proposal that might bail out South Africa’s ferroalloys industry is that Eskom agrees to a long-term power purchase framework in which there is tariff relief in return for smelters reducing consumption during peak demand periods. Ferrochrome and ferromanganese production consume base load power ‘when people are sleeping’, but it will vanish at the current rate of inflation. According to the Minerals Council of SA, electricity tariff hikes have culminated to about 500% over the last decade. In the meantime, the government has papered the cracks with an export tariff that would charge mainly Chinese buyers more for chrome ore – the stuff ferrochrome producers put in a furnace to make the higher-value ferrochrome, used in the fabrication of stainless steel. China buys about 85% of its chrome ore requirements…

Reunert has been under pressure. The stock trades at 2004 price levels, but the market may be seriously mispricing this share. Even as Reunert cuts its interim dividend in half, its dividend yield is in the double digits. Reunert has ICT and defence businesses, but what’s interesting to me is the engineering unit that, in part, manufactures and supplies cabling. All the talk about infrastructure spend is focusing on the construction stocks (the few left on the JSE) and those, such as PPC and Afrimat that supply the sector. I certainly like the investment case for these stocks. But a large part of the infrastructure spend will be power related as Eskom’s capacity gets boosted and Reunert will be able to supply cabling for the distribution of electricity. Further, it…

private higher education company, Stadio, controlled by PSG, said in August that its student numbers jumped 10% during the fiscal year through 30 June while its revenue rose 15% to R468.2m. However, the group has swung into a R78m loss from a profit of R52m previously, due to write-offs of existing brands as it shifts to a single brand under the name Stadio. Outlook: Stadio’s share price held at 75c/share and although it’s trading sideways, its bullish 3W RSI is suggesting that the bulls are returning. On the charts: Stadio has breached the resistance trendline of its long-term bear trend and is currently trading between 200c/share and 75c/share. If support holds firmly at 115c/share, a positive breakout would be in the offing and Stadio would embark on a new bull…

data is used everywhere these days. The upcoming US presidential election is a perfect example of this. Polls are updated literally on an hourly basis, to see if Trump or Biden will become the next US president. As with weather forecasts, which also rely on data, polls are not always correct (just ask Hillary Clinton), but it helps us to make more informed decisions. I don’t want to discuss the upcoming US elections, as more than enough time and reports have been dedicated to it. I rather want to discuss a secondary subject related to these elections, namely gold, and a few interesting phenomena currently manifesting in the data surrounding the metal. Is red the new gold? Since the Bretton Woods monetary system came to an end in 1971, the…

regulation 28 of the Pension Funds Act of1956 – designed to protect retirement savings from imprudent exposure to riskier assets, including offshore assets – has frustrated some local investors of late. Local returns have lagged offshore returns, and some have argued that a discretionary investment fully offshore would be preferable to a retirement vehicle, limited as it is by regulation 28. However, a previous article, penned by Ninety One deputy managing director Sangeeth Sewnath, discussed the impact of regulation 28 on portfolio returns and concluded otherwise. He argued that the tax benefits associated with a retirement fund potentially compensate an investor for any out performance that might be enjoyed by increasing your offshore exposure beyond what is allowed by regulation 28, in a discretionary investment. He investigated a 30-year investment…

modern monetary theory, or MMT as it is often called, is a new term for an old idea. Its proponents argue that a state, which issues fiat money does not have to resort to taxation and borrowing to pay its bills. It can fund itself simply by printing money. While there are numerous historical examples of unfunded fiscal spending being followed by hyperinflation and economic collapse, the modern supporters of what would previously have been regarded as economic heresy, say this time it is different. The simple truth is that central banks in the US, Europe and Japan have been applying the precepts of MMT for the past decade and in responding to the Covid-19 pandemic have abandoned any sense of traditional financial prudence. The US Federal Reserve (the Fed)…

many friends, colleagues and associates I meet these days seem to have been completely paralysed by the present situation. Their biggest fear is that the world financial system is headed for collapse. This is underpinned, for instance, by various research outfits beckoning that, while the first Covid-19 wave has wreaked havoc, a second one could be far worse. The huge slump that could follow, they argue, could take a huge bite out of your nest egg. They propose that you ought to start financial distancing at the very soonest to protect your money. The worst-case scenario could be a sink-or-swim situation over the next few years. These contentions are often compounded by successive news broadcasts, each more disturbing than the last. But what’s new? We’ve been through this before, notably…

the pressure on authorities to implement additional fiscal stimulatory measures to augment easing monetary policies from the central bank has reached a new crescendo in the US. But consensus on a new fiscal package to boost the economy has been elusive. The big question is whether additional fiscal measures will lead to an uptick in inflation as anticipated by some analysts, and so provide renewed support for equity markets. It was predicted that the massive stimulus measures of 2008 and 2013 would at some point lead to increased inflation in the US. But that has not happened, even in an environment of full employment. The US Federal Reserve (the Fed) has already indicated it overestimated the effect of higher inflation following through from the stimulus actions, even though it still…

corporate surveillance – the use of digital tools for employee monitoring – is not a new concept and there certainly is no shortage of tools available. However, following the global outbreak of the coronavirus, companies have increased their use of these tools – mainly to stem the initial fear of productivity losses when thousands of people started working from home. Companies are well advised to take all the legal and ethical considerations into account when introducing additional surveillance tools. Although something is legal, one should not jump to the conclusion that it is ethical, says Deon Rossouw, CEO of the Ethics Institute. “Apartheid was legal, but it certainly was not ethical.” SA legislation In South Africa employers are generally permitted to monitor employee performance and productivity. The applicable pieces of…