Back to top
SEARCH PSG

To search, just start typing...

SEARCH RESULTS

LOGIN

Please select which division you would like to log in to.


Markets in suspense ahead of the Fed’s interest decision

20 December 2018

Markets in suspense ahead of the Fed’s interest decision

banner

Market commentary

SA flag Icon
South Africa

The local bourse recovered some losses on Wednesday thanks to a lower oil price, a stronger rand and a strong performance from banks. The All Share closed up 0.65% and the Top 40 0.69%.

US flag Icon
United States

US equity markets rose on Wednesday due to strong performances from the tech sector and banks, and as investors hoped the US Federal Reserve (Fed) will continue with a moderate pace for interest rates. By 19h10, the Dow, the S&P 500 and the Nasdaq had all climbed by almost 1%.

EU flag Icon
Europe

European shares rose cautiously on Wednesday thanks to a boost from banks and the pharmaceutical sectors. Although the EU and Italy came to an agreement regarding Italy’s budget, markets treaded carefully in anticipation of the Fed’s announcement. At the end of trade, the STOXX 600 had gained 0.46%.

HK flag Icon
Hong Kong

Chinese markets took a knock on Wednesday, ahead of the US interest rate decision and due to the healthcare and energy sectors stumbling. The Shanghai Composite fell by 1.05% at its close.

Japan flag Icon
Japan

Japanese shares reached a nine-month low on Wednesday due to investors practising caution ahead of the Fed’s conference and the shares of SoftBank Group Corp plummeting. The Nikkei ended the day 0.59% down.

Rand Icon
Rand

The rand strengthened against major currencies on Wednesday as EU and Italy finally agreed on Italy’s budget and global markets waited for the Fed’s rates announcement. At 18h40, the rand strengthened to R14.15 against the dollar.

Precious metals Icon
Precious metals

While investors practised caution before the US interest rate decision later Wednesday evening, gold proved to be a safe haven. At 19h05, the price of an ounce of gold had risen to $1 255.

Oil Icon
Oil

Oil prices made up ground on Wednesday, gaining almost 3%; although investor sentiment was still negative, US data showed a demand for refined products. At 19h05, a barrel of Brent crude cost $57.56.


Market indicators

Local markets (R)
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
ALSI 51 569.77 0.66 - 1.42 - 8.19 - 6.70 - 8.51
Gold mining 1 355.53 2.04 18.74 28.23 26.65 12.29
Basic minerals 28 053.80 0.35 0.02 - 7.42 0.60 17.84
Industrial index 68 748.82 0.32 - 0.85 - 10.61 - 13.46 - 17.40
Financial 40 557.34 1.64 - 3.76 - 4.13 0.77 - 10.37
Fin + Ind 30 7 085.90 0.78 - 1.89 - 8.44 - 8.95 - 15.07
International markets (Base currency)
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
Dow Jones (USD) 23 323.66 - 1.49 - 6.52 - 11.15 - 4.48 - 3.63
S&P 500 PR (USD) 2 506.96 - 1.53 - 6.65 - 13.35 - 8.36 - 4.66
NASDAQ (USD) 6 636.08 0.46 - 6.31 - 14.49 - 11.96 - 1.97
FT-100 (GBP) 6 765.94 0.96 - 3.18 - 7.00 - 9.33 - 6.49
Hang Seng (HKD) 25 865.39 0.20 - 1.85 - 5.35 - 10.48 - 8.44
Nikkei 225 (JPY) 20 987.92 - 0.60 - 3.81 - 10.67 - 4.85 - 6.39
Paris CAC (EUR) 4 777.45 0.49 - 3.98 - 11.10 - 10.99 - 9.18
Frankfurt (EUR) 4 946.53 0.24 - 4.25 - 11.89 - 15.08 - 18.54
Other markets
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
Gold ($) 1 248.60 - 0.02 2.05 3.79 - 2.38 - 1.15
Platinum ($) 791.00 - 0.13 - 6.28 - 3.54 - 10.11 - 12.89
Brent Oil ($) 57.24 1.74 - 14.30 - 27.91 - 23.76 - 10.28
Rand/USD 14.37 -0.39 -2.10 -0.36 -5.93 -12.46
Rand/GBP 18.14 -0.01 -0.30 4.50 -0.85 -6.02
Rand/EUR 16.35 -0.32 -1.50 3.04 -3.83 -8.07
ALBI (R) 622.06 0.31 0.19 1.90 4.31 6.04
  1. Some data may be delayed, the above table reflects the latest available information
  2. Performance reported during the first week of each month may be impacted by distributions. Distributions are fully accounted for by the second week of each month


Economic calendar

Local International
  1. ZA: No economic data scheduled for release
  1. UK: BoE quantitative easing
  2. UK: MPC meeting
  3. JPN: Inflation rate NOV (01h30 Friday)

Source: Reuters, Business Day, Trading Economics


PSG Product Matrix

Fund matrix

PSG Wealth Solutions
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Enhanced Interest D 3.88 7.97 8.05 8.01 7.71 7.35
PSG Wealth Income FoF D 3.03 6.89 7.95 8.28 8.05 7.93
PSG Wealth Preserver FoF D - 1.41 1.10 4.83 5.35 6.35 7.04
PSG Wealth Moderate FoF D - 5.18 - 3.63 3.24 4.40 5.37 6.53
PSG Wealth Creator FoF D - 8.04 - 7.60 1.64 4.29 3.73 5.25
PSG Wealth Global Moderate FF D - 0.87 4.30 3.59 1.29 6.95 8.02
PSG Wealth Global Creator FF D - 3.31 7.32 9.29 5.25 12.11 -
PSG Wealth Solutions ($)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Global Moderate FoF D - 6.70 - 7.33 2.48 2.98 1.05 1.15
PSG Wealth Global Creator FoF D - 9.53 - 5.89 7.75 6.89 5.43 5.48
PSG Wealth Global Preserver FoF (USD) D - 1.81 - 2.56 2.38 4.43 3.05 3.33
PSG Wealth Global Flexible FoF (USD) D - 5.64 - 2.82 8.15 8.05 6.11 5.89
PSG Wealth Solutions (£)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Global Preserver FoF (GBP) D 1.40 1.78 2.25 8.54 6.80 6.96
PSG Wealth Global Flexible FoF (GBP) D - 1.64 0.86 6.56 12.31 10.28 10.42
PSG Asset Management
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Money Market A 3.55 7.29 7.45 7.40 7.17 6.88
PSG Income A 4.00 8.39 8.52 8.41 7.92 7.62
PSG Diversified Income 2.74 6.52 7.55 7.75 7.73 7.53
PSG Stable A - 0.59 2.28 5.20 6.83 6.74 6.96
PSG Balanced A - 4.27 - 2.62 2.89 6.93 6.10 7.39
PSG Flexible A - 4.39 - 2.44 2.50 8.41 7.09 8.46
PSG SA Equity D - 7.30 - 8.10 - 1.79 9.60 - -
PSG Equity A - 6.70 - 6.35 0.61 9.99 4.84 7.02
PSG Global Flexible FF A - 3.12 1.96 3.18 5.51 8.27 -
PSG Global Equity FF A - 4.77 0.74 4.23 6.76 8.07 9.29
PSG Asset Management ($)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Global Flexible USD A - 10.04 - 11.16 1.73 7.72 2.10 2.22
PSG Global Equity USD - 11.56 - 12.58 2.63 8.84 1.88 2.28
PSG Direct Portfolios
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Direct Flexible Income 3.25 7.09 7.55 7.56 7.28 7.01
PSG Direct Low Equity - 1.04 1.49 4.64 6.55 6.31 6.69
PSG Direct Managed - 4.51 - 3.02 2.32 6.82 5.87 7.17
PSG Direct Aggressive - 4.93 - 2.92 1.77 7.95 6.41 -
PSG Direct Global Managed - 3.34 1.49 2.71 5.03 7.77 -
PSG Direct Global Aggressive - 4.38 0.74 3.38 5.82 7.66 -
  1. The PSG Wealth Solutions are exclusively available through registered PSG planners and/or advisers
  2. The above information reflects the latest available data at time of distribution, as such product performance data reflects T-2 numbers
  3. Performance reported during the first week of each month may be impacted by distributions. Distributions are fully accounted for by the second week of each month
  4. The PSG Best Ideas Portfolios were renamed to the PSG Direct Portfolios in February 2018

Equity portfolio matrix

PSG Wealth Equity Portfolios
Portfolio 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth SA Equity Portfolio -7.75 -4.31 2.12 6.29 - -
PSG Wealth SA Property Equity Portfolio -10.32 -17.23 -3.20 -3.26 - -
PSG Wealth SA Dividend Income Equity Portfolio -6.28 -8.07 4.06 - - -
PSG Wealth Offshore Equity Portfolio (USD) -0.46 -0.10 13.78 11.58 - -
PSG Wealth Managed Volatility Equity Portfolio -10.21 -10.66 -1.65 - - -
  1. The PSG Wealth equity portfolios are exclusively available through registered PSG planners and/or advisers
  2. PSG Wealth equity portfolio performance are shown gross of management fees, but net of brokerage and other trading costs
  3. PSG Wealth SA and Offshore Equity Portfolio Inception date: 30 August 2015
  4. PSG Wealth SA Listed Property Portfolio Inception date: 1 December 2015
  5. PSG Wealth Dividend Income Equity Portfolio Inception date: 29 April 2016
  6. PSG Wealth Managed Volatility Equity Portfolio Inception date: 28 July 2016
  7. PSG Wealth Funds are exclusively available through registered PSG planners and/or advisers


Recent trade ideas

company logo

Share name Share code Release date Recommended exposure is less than Share price Read the full report
Naspers Limited NPN: Johannesburg 31 October 2018 7% ZAR 262 610 cents Login to read the full report

Highlights

  • The largest contributor to Naspers’s net asset value (NAV) remains its investment in Tencent, which is separately listed on the Hang Seng stock exchange.
  • Tencent was a key contributor to the overall performance and remains the dominant factor in investment returns given its size in the portfolio.
  • We remain concerned over the stretched valuation of Tencent and we feel that regulatory changes and slower advertising growth due to a difficult Chinese macroeconomic environment, are evolving into significant headwinds.
  • This might impact earnings from both the gaming and the advertising operations, which are the drivers of sustained earnings growth. Slower growth in these divisions is likely to translate into earnings growth below current market estimates and can place further pressure on the share price.
  • Our estimation shows that Naspers is currently trading at a 7% discount to our sum of the parts (SOTP) valuation.
  • Reduced cash burn of internet assets, improved profitability as scale builds, lower development and marketing spend, as well as corporate actions (including the unbundling of the video entertainment division) could lead to a narrowing in the discount.
  • While the group’s balance sheet has improved after selling investments in Tencent (partially) and Flipkart (completely), potential value-destruction acquisitions remain a concern.
  • Naspers has significant forex exposure, which could impact the group’s valuation significantly.
  • Emerging market risk aversion and changes in venture capital’s risk appetite, could have a material impact on the valuation of investments.


company logo

Share name Share code Release date Recommended exposure is Share price Read the full report
Tencent Holding Limited 700: Hong Kong 19 October 2018 0% ZAR 29 200 cents Login to read the full report

Highlights

  • Given the evolving nature of many of the group’s businesses, determining sustainable growth accurately remains a challenge. With high growth already been priced into the valuation we feel the share is fairly-valued.
  • Forecasting risk, however, remains high due to regulatory changes and slower advertising growth caused mainly by a challenging macroeconomic environment evolving into a significant headwind.
  • The group’s leadership position in social media platforms (WeChat and QQ) provides it with significant potential to monetise ad inventory, optimised by data and analytics gathering across its multiple platforms. This should allow it to push more relevant and personalised content, which should translate into higher ad conversion and therefore ad pricing.
  • The recently announced reorganisation of the company intends to integrate product teams and data better and to improve analytics to deliver personalised content and ads to users. Tencent's advertising penetration is still lagging behind its peers; in the short term, improved adoption is likely to be constrained by a more difficult macroenvironment and the communicated reorganisation.
  • Sentiment towards China's mobile games industry is likely to remain weak given poor monetisation of survival games and the uncertain regulatory environment. New initiatives such as tournament games and overseas expansion are only likely to contribute in the medium term.


company logo

Share name Share code Release date Recommended exposure is Share price Read the full report
Woolworths WHL SJ 19 October 2018 0% ZAR 4 841 cents Login to read the full report

Highlights

  • We recommend an underweight position in Woolworths as we feel divisions face material, structural and cyclical challenges, which, combined with a strained balance sheet significantly increase their risk profile.
  • The food operation is the most attractive division; consistently producing sector leading volume growth and market-share gains.
  • But, we are concerned about the impact constrained consumers will have on medium-term results and the division’s ability to drive efficiency gains further as margins are already on a high base and ahead of management’s medium-term targets.
  • While we expect results to remain solid, it is unlikely for food to stay the engine for growth, as it has been in the recent past, with the division contributing close to 40% of earnings.
  • Local clothing and general merchandise is suffering from a cyclical downturn and achieved three-year CAGR (compound annual growth rate) of around 3% while margins declined by a quarter as the division struggled with a poor fashion offering, which assisted international players to gain market shares.
  • The David Jones operations remain a primary concern as structural challenges in the retail environment are raising fears around the sustainability of its current business model.
  • Management directed significant CapEx for transformational initiatives to retain relevance.
  • Department stores in Australia have come under significant pressure with the entry of Amazon in the market.
  • The division’s challenges combined with the group’s already highly levered balance sheet increases indicates to downside risk in our opinion.
  • We estimate, should trading conditions remain constrained, negative free cash flow is likely to place pressure on the group’s ability to maintain its dividend cover.


Corporate actions

Date Company Share code Expectation
02 January 2019 Lighthouse Capital Limited LTE Capital Distribution
02 January 2019 The Foschini Group Limited TFG Cash Dividend
02 January 2019 Telemasters Holdings Limited TLM Cash Dividend
  1. The information above is to the best of our knowledge correct at the time of distribution but due to the nature thereof cannot be guaranteed.
  2. This document only contains general information and not the opinion of the distributor.

Recommended Articles

Global markets kept their nerve amid mixed news from Asia

JSE higher on Friday as global markets rallied

JSE lower as general retailer index slumps

Author
author

Adriaan Pask PhD

Chief Investment Officer


At PSG Wealth
Copyright © PSG Konsult Ltd (1998-2019), All Rights Reserved. FAIS affiliates of the PSG Konsult Group are authorised financial services providers.