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Investment Opportunities: Balancing Act. Presented by: Dawie Roodt 6 March 2008. “…The global economy grew by 5 per cent from 2003 to 2007. It was a period of robust expansion but also of widening international imbalances. Now there are storm clouds ahead...”.

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investment opportunities balancing act

Investment Opportunities:Balancing Act

Presented by: Dawie Roodt

6 March 2008

slide3

“…The global economy grew by 5 per cent from 2003 to 2007. It was a period of robust expansion but also of widening international imbalances. Now there are storm clouds ahead...”

- Minister Trevor Manuel, 2008 budget presentation

in this presentation
In This Presentation:
  • South African Economic Trends
  • Investment and the Business cycle
  • Balancing risk and return
  • Balanced portfolio
slide6

Economic Overview

Financials

- Banks

Financials

Retailers

Positive for equity

Negative for bonds

Neutral equities

Positive bonds (short term)

Negative bonds (long term)

Positive for rand hedges

Negative for importers

Negative for bonds

Positive rand hedges

Positive exporters

Negative importers

Negative bonds

Negative equities

Positive bonds

gdp at market prices
GDP at Market Prices

Source: StatsSA and own calculations

pressure on the rand
Pressure on the Rand…

9/11

Aftermath

  • US troubles
  • Emerging Market Risk rising
  • Global Inflation
  • - Bull run
  • Stability
  • Emerging Market Appetite

- Politics

- Eskom

Inflation bracket

Source: SARB and own calculations

inflation
Inflation

Inflation bracket

CPIX Ave: 5.9%

Source: StatsSA and own calculations

interest rates
Interest rates

Toothless SARB

Source: SARB and own calculations

slide14

Private Sector Credit Extension

Source: SARB and own calculations

household debt to disposable income
Household debt to disposable income

59.4%

56.9%

50.2%

44.5%

Source: SARB and own calculations

savings to disposable income of households
Savings to disposable income of households

9.2%

5.4%

2.6%

0.5%

Source: SARB and own calculations

balance of payments1
Balance of Payments

Source: SARS and own calculations

background
Background

Deficit

Gold

Surplus

consumption expenditure
Consumption Expenditure

Positive for retailers and consumer goods

Source: South African Reserve Bank

gross fixed capital formation
Gross Fixed Capital Formation

Infrastructure boom

Source: South African Reserve Bank

total exports and imports
Total Exports and Imports

Trade Account Deficit

Source: South African Reserve Bank

resources
Resources
  • Pro’s
    • Value of sales
    • Boom in commodity prices
    • Global demand for resources
    • Weaker rand inflates income
  • Cons
    • Production problems (labour, electricity, deep gold mines, input costs)
    • Sustainability of high precious metal prices?
    • High P/E-ratio
mining and quarrying gdp at market prices
Mining and Quarrying GDP at Market Prices

Source: StatsSA and own calculations

mining value of sales
Mining Value of Sales

Bull Run

Inflation bracket

Source: StatsSA

resources price and pe
Resources: Price and PE

Inflation bracket

Source: I-net

industrials
Industrials
  • Pro’s
    • Infrastructure development
    • Manufacturing drive (auto industry, etc)
    • Weaker rand support exports
  • Cons
    • Electricity supply
    • Slower growth?
manufacturing gdp at market prices
Manufacturing GDP at Market Prices

Source: StatsSA and own calculations

manufacturing value of sales
Manufacturing Value of Sales

Inflation bracket

Source: StatsSA

industrials price and pe
Industrials: Price and PE

Inflation bracket

Source: I-net

financials
Financials
  • Pro’s
    • Interest rate cycle (Domestic and global)
    • Global competitive institutions
    • Value for money (P/E basis)
  • Cons
    • Sub-USA crisis
    • Pessimism towards sector
    • Uncertainty
finance real estate and business services gdp at market prices
Finance, Real Estate and Business Services, GDP at Market Prices

Source: StatsSA and own calculations

financials price and pe
Financials: Price and PE

Inflation bracket

Source: I-net

construction
Construction
  • Pro’s
    • Infrastructure boom (2010)
    • Interest rate cycle (Domestic and global)
  • Cons
    • Supply constraints
    • Electricity
construction gdp at market prices
Construction GDP at Market Prices

Source: StatsSA and own calculations

construction and material price and pe
Construction and Material: Price and PE

Inflation bracket

Source: I-net