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JSE rose by almost 2% on Monday

27 November 2018

JSE rose by almost 2% on Monday

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Market commentary

SA flag Icon
South Africa

It was a great start to the week for the local bourse as positive data released by banks, general retailers and industrials led to investor risk-on sentiment. The JSE All Share closed up 1.96% and the Top 40 2.27%.

US flag Icon
United States

Retail and technology shares pulled up by Black Friday and Cyber Monday spending lifted US markets on Monday. At 21h40, the Dow was 1.40% up, the S&P 500 1.52% and the Nasdaq 1.86%.

EU flag Icon
Europe

Monday marked a good day for European markets due to reports that Italy might amend their budget in line with the EU’s requirements; moreover, on Sunday the EU and Britain came to an agreement around Brexit, lifting both currencies. The pan-European STOXX 600 benchmark closed 1.20% in the green.

HK flag Icon
Hong Kong

Despite losses suffered by Chinese markets, Hong Kong shares still rose on Monday as investors anticipated a more dovish approach to interest rates by the US Federal Reserve Bank (Fed). The Hang Seng closed 1.66% in the green.

Japan flag Icon
Japan

Japanese shares started the week in the green due to Japan winning the bid to host the 2025 World Expo in Osaka. At their end of trade, the Nikkei was up 0.81%.

Rand Icon
Rand

The local currency put up quite a fight on Monday thanks to positive market data being released. Although it lost some ground to major world currencies, it still kept its footing under R14 per dollar. At 21h05, the rand traded R13.89 against the dollar.

Precious metals Icon
Precious metals

Bullion prices were up on Monday as uncertainty rose amongst investors regarding the Fed’s plans to increase US interest rates as well as the possibility that the US-China trade war might reach a conclusion at the G20 summit held later this week. At 21h20, spot gold traded $1 222.62 per ounce.

Oil Icon
Oil

Although the oil price rose by almost 3% on Monday, it was curbed by uncertain global economic growth and an increase in oil supplies and production. At 21h10, a barrel of Brent crude cost $61.02.


Market indicators

Local markets (R)
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
ALSI 51 690.12 1.96 1.72 - 11.02 - 7.72 - 11.61
Gold mining 1 127.24 - 1.19 - 7.11 18.70 15.44 - 22.16
Basic minerals 26 095.63 - 0.30 - 5.93 - 9.11 - 1.91 - 0.07
Industrial index 70 216.22 2.72 3.79 - 16.43 - 12.96 - 21.94
Financial 42 057.21 2.60 5.36 - 1.16 - 2.07 2.55
Fin + Ind 30 7 275.84 2.68 4.34 - 11.60 - 9.40 - 14.72
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) 24 638.47 - 0.73 - 3.34 - 4.84 - 1.32 5.56
S&P 500 PR (USD) 2 673.45 1.57 0.77 - 6.54 - 0.81 4.74
NASDAQ (USD) 7 082.12 - 0.48 - 6.56 - 11.68 - 6.06 2.10
FT-100 (GBP) 7 036.00 1.20 1.86 - 6.35 - 7.04 - 1.01
Hang Seng (HKD) 26 376.18 1.73 6.81 - 3.94 - 11.75 - 8.58
Nikkei 225 (JPY) 21 812.00 0.76 3.06 - 2.72 - 1.87 - 1.36
Paris CAC (EUR) 4 994.98 0.97 0.58 - 7.90 - 9.04 - 5.23
Frankfurt (EUR) 5 155.76 1.45 1.38 - 8.39 - 12.24 - 13.06
Other markets
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
Gold ($) 1 226.65 0.37 - 0.76 3.08 - 5.93 - 4.85
Platinum ($) 846.00 0.48 2.42 7.91 - 7.24 - 9.62
Brent Oil ($) 58.80 - 6.07 - 23.08 - 21.32 - 26.32 - 7.47
Rand/USD 13.91 -0.60 5.19 2.26 -11.01 1.33
Rand/GBP 17.81 -0.58 5.25 2.69 -6.90 5.08
Rand/EUR 15.76 -0.55 5.46 5.26 -7.88 6.21
ALBI (R) 626.67 - 0.38 3.22 1.60 0.80 12.61
  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: Business confidence Q4
  1. FR: Consumer confidence Nov
  2. US: House price index MoM Sep

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 3.92 7.96 8.06 8.02 7.71 7.34
PSG Wealth Income FoF D 3.36 7.51 7.97 8.03 8.13 7.95
PSG Wealth Preserver FoF D - 0.13 0.51 5.02 5.10 6.49 7.11
PSG Wealth Moderate FoF D - 3.31 - 4.80 3.69 3.81 5.49 6.65
PSG Wealth Creator FoF D - 7.99 - 11.34 1.41 2.09 3.07 5.09
PSG Wealth Global Moderate FF D 3.93 - 4.41 3.20 2.34 7.30 7.88
PSG Wealth Global Creator FF D 3.85 - 0.85 9.63 6.84 12.37 -
PSG Wealth Solutions ($)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Global Moderate FoF D - 5.37 - 4.86 4.08 2.55 0.89 1.21
PSG Wealth Global Creator FoF D - 5.21 - 1.19 10.42 6.96 5.63 5.92
PSG Wealth Global Preserver FoF (USD) D - 1.44 - 1.32 3.25 4.41 2.82 3.28
PSG Wealth Global Flexible FoF (USD) D - 2.70 - 0.30 9.84 8.25 5.78 5.87
PSG Wealth Solutions (£)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Global Preserver FoF (GBP) D 1.26 1.61 2.57 8.75 6.35 6.64
PSG Wealth Global Flexible FoF (GBP) D 1.70 3.00 7.91 12.90 9.99 10.07
PSG Asset Management
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Money Market A 3.58 7.30 7.47 7.38 7.15 6.85
PSG Income A 3.85 8.68 8.45 8.30 7.88 7.59
PSG Diversified Income 3.02 7.56 7.80 7.89 7.89 7.61
PSG Stable A 0.64 4.71 6.10 7.00 7.33 7.28
PSG Balanced A - 1.66 0.49 4.50 6.73 7.14 7.97
PSG Flexible A - 2.26 - 0.56 4.12 7.87 7.93 8.98
PSG SA Equity D - 9.34 - 5.01 0.09 6.02 - -
PSG Equity A - 4.96 - 3.62 2.64 7.87 5.17 7.68
PSG Global Flexible FF A 3.69 - 3.54 4.29 6.64 9.35 -
PSG Global Equity FF A 2.71 - 3.03 5.86 7.86 9.23 9.55
PSG Asset Management ($)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Global Flexible USD A - 5.74 - 3.19 5.61 7.61 3.11 3.07
PSG Global Equity USD - 6.50 - 2.60 7.17 8.74 3.09 3.26
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 3.27 7.62 7.61 7.56 7.31 7.03
PSG Direct Low Equity 0.33 3.82 5.58 6.63 6.92 7.02
PSG Direct Managed - 2.03 - 0.23 3.93 6.53 6.85 7.73
PSG Direct Aggressive - 1.93 - 2.31 3.39 7.35 7.16 -
PSG Direct Global Managed 3.46 - 3.98 3.82 6.16 8.85 -
PSG Direct Global Aggressive 2.84 - 3.65 4.81 6.92 8.78 -
  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 -8.18 -5.21 1.98 3.91 - -
PSG Wealth SA Property Equity Portfolio -6.36 -7.07 -1.13 - - -
PSG Wealth SA Dividend Income Equity Portfolio -8.90 -2.96 4.50 - - -
PSG Wealth Offshore Equity Portfolio (USD) 1.27 4.25 15.72 11.49 - -
PSG Wealth Managed Volatility Equity Portfolio -11.27 -7.63 -2.75 - - -
  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
27 November 2018 Afrimat Limited AFT Cash Dividend
27 November 2018 AYO Technology Solutions Limited AYO Cash Dividend
27 November 2018 Investec Australia Property Fund Limited IAP Interest Distribution
27 November 2018 Nutritional Holdings Limited NUT Tender Offer
27 November 2018 Oasis Crescent Property Fund (REIT) OAS DRIP (Ordinary Cash Dividend)
Option 1 - (Cash Dividend) Gross - ZAR0.544827909Less 20% - ZAR0.1089655818Net - ZAR0.435423272
Option 2 (Reinvestment)Reinvestment Price - ZAR21.68
Default - Option 2
27 November 2018 Redefine Properties Limited (REIT) RDF Cash Dividend
27 November 2018 Rebosis Property Fund Limited (REIT) REA Cash Dividend
27 November 2018 Rebosis Property Fund Limited (REIT) REB Cash Dividend
27 November 2018 RDI REIT Plc RPL Cash Dividend
27 November 2018 Telkom SA SOC Limited TKG Cash Dividend
27 November 2018 Torre Industrial Holdings Limited TOR Cash Dividend
27 November 2018 Vodacom Group Limited VOD 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.

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Author
author

Adriaan Pask PhD

Chief Investment Officer


At PSG Wealth
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