Sasfin Securities; Balancing the risks & global economic outlook; Nov 2013
-
Upload
deencomputing -
Category
Business
-
view
363 -
download
0
Transcript of Sasfin Securities; Balancing the risks & global economic outlook; Nov 2013
SENATE CONFERENCE 2013
• As a division of the Sasfin Group, Sasfin Wealth has for over 120 years been providing trusted advice and wealth management solutions.
• We have a national presence and consult to and manage in excess of R70 billion.
SASFIN WEALTH
FOOTPRINT
Johannesburg
Pretoria
Cape Town Port Elizabeth
George
Bloemfontein Durban
Hong Kong
Investment team
Investment Process
Competitive advantage
• Experienced investment team
• Superior ability to read markets
• Adaptive investment style
• High conviction
• We optimise risk adjusted returns by consistently adding increments
of return
Awards
2012: Raging Bull
• Best broad-based Domestic Equity Fund on a straight performance basis, being the
fund with the highest Profile Data total investment return ranking over three years in
the ASISA Domestic Equity General, Value and Growth sectors
2012: Raging Bull
• Best Domestic Equity Value Fund
Sasfin Securities
• Our heritage dates back to 1890 when Otto Pollock became a member of the JSE.
• Today we have in excess of R60 billion of assets under administration which makes us one of the largest and most experienced private client stockbroking businesses in South Africa.
• We pride ourselves on our ability to offer truly bespoke investment solutions both locally and internationally, coupled with uncompromising levels of client support.
We identified 6 traits which are non-negotiable when it comes to successful investment management.
• Relationship: The successful investor interacts and builds a sound relationship with an investment professional that truly understand their needs and carefully manages the emotional aspects of investing.
• Independence: The successful investor chooses an advisor whose independence is unconstrained by investment bias.
• Trust: The successful investor invests with a wealth management company who they can trust – an entity that has a solid reputation and extensive history of successful wealth management.
• Expertise: The successful investor entrusts their wealth to capable and astute professionals who have the ability to navigate through difficult market cycles.
• Simplicity: The successful investor has a clear understanding of their portfolio and related fees. They steer clearfrom opaque investment products that aren’t fully understood.
• Global: The successful investor requires a globally diversified portfolio which is managed locally.
Offering
• Full Discretion: Sasfin assumes full responsibility for the management of the underlying portfolio.
• Referral managed: Sasfin advises on the underlying securities while the client is ultimately the decision maker.
• Deal & Execution: Our clients will be required to formulate and implement their own investment strategy.
• Offshore: Our global trading platforms and international research allow us to think globally while executing locally.
• Personalised share portfolio: We manage your client’s compulsory and voluntary money in a tax effective manner.
Foundation Portfolios
• Foundation Fund Fact Sheets
• Client proposal
Our offering is available through:
• Glacier & Glacier International (Sanlam)
• Investec
• Momentum
• Old Mutual International.
Thank You
• This presentation has been compiled by Sasfin Financial Advisory Services (Pty) Ltd - Co. No.1997/010819/07; a licensed Financial Services Provider - FSP No. 5711 (use the one or other as appropriate)
• Sasfin Asset Managers (Pty) Ltd - Co. No. 2007/018275/07; a licensed Financial Services Provider - FSP No. 21664
• in the context of the services it provides. The contents are proprietary and may not be copied or disclosed without consent. Information and opinions are general and subjective in nature and do not constitute advice. Any references to historical data, assumptions, targets, benchmarks or examples are as indicators / illustrations only and are not fixed or guaranteed. Past investment performance is not necessarily indicative of future performance. While care is taken to provide current and accurate information, no liability is accepted for errors, omissions or subsequent changes and this presentation remains subject to revision, verification and amendment without notice and without liability to compensate or reimburse any party. Anyone acting on this presentation before taking appropriate advice does so at their own risk
DISCLAIMER
World Markets
Balancing the risks
Shut happens!
20
Past few weeks underscored by the debt ceiling debate,
improving economic numbers and talk of tapering
Tea Party echoing same thinking Republican moderates have
expressed for years, except at higher volume
Abhorrence of ObamaCare, loathing of government, faith in tax cuts and
free market etc.
Tactics nearly forced US default
Caused grievous harm to Republican brand – 53% of
Americans blamed Republicans versus 29% Obama
Damaged Republicans’ business leaning image
Sequester lowered growth – Grand Bargain on spending
cuts sought
Shutdown and debt ceiling protests hurt business
confidence – cost of shutdown estimated at $24bn
Tapering delay until there is clear evidence that the economic
recovery is on a sustainable path
US economy – chugging along
21
Employment rising
24 months of successive job increases
Oct job numbers well ahead of consensus
Housing recovering
New houses sold double 2011 lows
Retail spending improving
Above pre-crash levels
Trade balance shrinking
Half ‘08 highs of -$70bn
Budget deficit falling
An increased level of tax receipts and lower government spending
Oil & gas production exploding
US fastest growing producer in 2012 lifting output by 1m barrels per day to 8.9m
Lower birth rate projections, aging work force and slowing productivity
Gains likely to reduce GDP to 1.9% between 2012 and 2032 from post-war average of 3.5%
S&P500
22
1990 - 2000 2000 - 2010
2010 - 2020
Tech revolution
Globalisation
Cell phone
Internet
GFC (Collapse of Lehman)
China emerges
9/11 crisis
End of commodity super cycle
Shale, oil, gas revolution
IT & communication transformation
3D printing, big data
Aging demographics: US, Japan, China, Europe
What the Frack ?
Hydraulic Fracturing
24
The Natural Gas Revolution
25
Fracking has allowed energy companies to dig deeper than
before unlocking unconventional oil deposits
North America has largest stores of unconventional oil
50% more than total conventional crude in the Middle East
US could overtake Saudi Arabia as the world’s largest oil
producer by 2020
Making it less dependent on oil from foreign nations whose
interests conflict with theirs
Imports are down to 40% from 60% in 2005
Crude Oil net Imports
Crude Oil net Exports
The Natural Gas Revolution
26
Fracking has produced an abundance of inexpensive natural gas
Natural gas used to power ships, trains, heavy goods vehicles and
power stations
Natural gas power stations have half the emissions of conventional
coal plants
Emissions fallen 12% since 2007 on conversions
Boom in oil and gas drilling creating jobs in states hard hit by
recession
Cheaper energy input costs attracting manufacturing back to the US
1m manufacturing jobs could be added by 2025
Plentiful oil will diminish incentives to reduce reliance on fossil fuels
BNSF carry 650k barrels
a day, soon to increase to
750k barrels a day, will
eventually reach over 1m
barrels a day
Global Economy
Size of economy
US 21.6%
China 10.4%
EU 26%
Japan 8.4%
Brazil 3.6%
UK 3.5%
Russia 2.6%
Est. growth 2014
China 8.2%
India 6.2%
Russia 3.8%
Brazil 4%
US 3%
Australia 3%
UK 1.5%
Europe 1.1%
World 4.00%
Emerging Regions 5.70%
Advanced Economies 2.20%
Europe’s deficit problem
28
Europe: signs of economic recovery are visible
29
Recovery still fragile – deflation becoming the biggest danger
Forecast growth for 2014 at 0.5%
Short of the pace needed to head off deflation & address the on-going debt crisis
Germany and France slowing but Italy and Spain performing better
Spain, Italy & Portugal also showing economic gains Spain out of recession, growing at 0.1% in Q3
EU needs to increase growth potential, enhance job creation &
boost European competitiveness
The origins of the disaster lies with excessive private borrowing
Greece got into trouble because its government spent too much and
collected too little in taxes
The bust followed a private sector binge: mortgage debt in Ireland
and Spain, corporate borrowing in Portugal and Spain
Without growth, zombie firms are unable to invest or grow
Much like those wafting through Japan in the 1990s
Euro zone blighted by private
debt even more than Govt debt
Euro zone expected to
expand by 1.2%
UK: economy accelerates to fastest growth since 2010
30
UK economy growing at its fastest rate in 6 years
Unemployment at 3 year low
Recovery beginning to take hold
2013 growth upgraded to 1.6% from 1.4%
Forecast growth 2.8% for 2014
Interest rates could begin rising sometime in 2015, once
employment falls to 7%
Unlikely that the recovery will fade significantly:
- Revival of the British housing market
- Youth unemployment falling
- Confidence returning
- Obstacles home and abroad remain
“The economy is growing
robustly as lifting uncertainty &
thawing credit conditions start
to unlock pent up demand”
Mark Carney
Governor BOE / Chairman MPC
31
Japan: “Abenomics” a mix designed to jolt the economy
Japan’s economy will remain on track as the
government prepares a 5 trillion yen ($50.6bn)
stimulus package to offset the drag from a sales
tax increase scheduled for next April.
Economists expect the majority of the stimulus
package to be spent on infrastructure and tax
breaks for the corporate sector.
Reuters
CPI
Electrifying a nation that had lost faith in its political class
Nikkei
Japan’s economy recovering at moderate pace
despite slowing exports
Imports likely to remain strong due to solid
domestic demand, while business sentiment is
improving
Emerging Markets continue to disappoint
33
China grows at the slowest pace in 13 years
Indian Rupee falls to record lows – rates rising to stem outflows
Brazil’s fundamentals deteriorate on incoherent economic policy
Russia down on falling energy prices and tight corporate credit
Investors continue to withdraw from emerging markets even in the
face of Fed tapering talk
S&P500 vs MSCI Emerging Markets Index
Emerging Markets
Developed Markets
“Investors looking for
emerging market-like growth
rates should look to the US”
Meredith Whitney
China’s tectonic shift – the dawn of a new era
New regime acting more carefully, balancing growth, shifting
from a production oriented economy to one centred around
household consumption
Third Plenum:
Supported land reform, fiscal reform and judicial system
Disappointed on financial liberalisation, one-child policy & residency reform
Demand slowly recovering, expect growth around 7.5%
Structural reforms designed to improve the supply side of the
economy
Reforms would help sustain the growth of productive capacity,
improving the allocation of capital and labour
Cutting red tape and other regulatory barriers to entry would
help private firms invest in industries now dominated by state-
owned enterprises
• Home to 20% of the world’s
population
• Household consumption
accounts for 38% of GDP
(US ~70%)
• World’s largest car market,
19.3m cars sold in 2012
• Largest internet market in
the world
• Reduced the per-watt cost of
solar power from over $3
(2008) to under $1 (2011)
- 23% + 24%
Consumption expected to overtake investment as the largest contributor to GDP
Investment Consumption
42% (2010 – 2020) 41% (2010 – 2020)
34% (2020 – 2030) 51% (2020 – 2030)
China’s growing middle class is demanding more
Western brands sell a lifestyle / image aiming to attract the aspirant Chinese consumer
Adidas
Nike
Paul Frank
McDonalds
Starbucks Haagan-Dazs
South Africa
37
Widespread labour unrest disrupting mining and manufacturing output
Falling commodity prices putting pressure on mine earnings
Rising input costs, electricity constraints, squeezing manufacturing
margins
Slowdown in household spending
Continued shift in fiscal policy to social spending from infrastructure
Corruption, poor skills, inefficiency
WEC ranks SA’s education system 146 out of 148 countries and last in Maths & Science
Hesitant domestic and foreign investor confidence
Pessimism about the long term outlook for the economy
Debt downgrade possible if deficits continue to deteriorate
JSE trading at all time highs
0 200000 400000 600000 800000 1000000 1200000
Aspen
Barclarys
Kumba Iron Ore
Old Mutual
Vodacom
Firstrand
Standard Bank
Sasol
Anglo American
MTN
Naspers
Richemont
Billiton
SABMiller
British Am Tobacco
Breakdown of the JSE: +23% from 1st Nov 2012
The top 15 companies make up over 70% of the JSE (12 month return)
Market cap (ZAR)
25%
41%
12%
85%
69%
29%
-11%
37%
19%
29%
9%
-21%
36%
9%
75%
Market Cap
Pick ‘n Pay 23bn
Telkom 14bn
Adcock 12bn
JD Group 7bn
1.1 tr
859 bn
655 bn
536 bn
385 bn
368 bn
335 bn
328 bn
203 bn
202 bn
172 bn
158 bn
137 bn
129 bn
124 bn
Xstrata/Glencore Market cap: R714bn
Local Investment Ideas: Stick with the winners
2) Emerging market consumption growth SABMiller, British American Tobacco, Richemont
40
Companies expanding offshore into high growth regions Naspers, Aspen, Bidvest, BHP Billiton, Sasol, Glencore
Emerging market consumption growth SABMiller, British American Tobacco, Richemont
Superior retail business models continue to hold Famous Brands, Woolworths, Mr Price
Expansion into Africa Imperial, MTN, Omnia, Shoprite
Expanding middle class exploring medicare options Life Healthcare, Mediclinic, Discovery
JSE is more of a convenience store than a supermarket
41
JSE Global Markets
Create a champions league portfolio
42
JSE Global Markets
A guideline to our team’s offshore investment ideas
2) Emerging market consumption growth SABMiller, British American Tobacco, Richemont
43
Escalating prosperity in developing nations LVMH, Daimler, Prada, BMW
Increasing urbanisation L’Oreal, Altria, Anheuser-Busch InBev
Competitive companies focusing on the consumer
Nestle, Unilever, Adidas, J&J
High yield in a low yielding environment Royal Dutch Shell, AstraZeneca, Sanofi, Allianz, Vodafone
America: The next emerging market General Electric, Wells Fargo, JPMorgan, Berkshire Hathaway
IT: Tech players transforming our lives Google, Amazon, Microsoft
Thank You
44
David Shapiro Deputy Chairman / Director
Kavita Patel Portfolio Manager [email protected]
Craig Diesel Portfolio Manager
Carmen Solomons Portfolio Assistant