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  1. Investment Opportunities:Balancing Act Presented by: Dawie Roodt 6 March 2008

  2. “…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

  3. In This Presentation: • South African Economic Trends • Investment and the Business cycle • Balancing risk and return • Balanced portfolio

  4. South AfricanEconomic Trends

  5. 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

  6. South Africa:GDP

  7. GDP at Market Prices Source: StatsSA and own calculations

  8. Monetary Policy

  9. 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

  10. Inflation Inflation bracket CPIX Ave: 5.9% Source: StatsSA and own calculations

  11. Interest rates Toothless SARB Source: SARB and own calculations

  12. Debt Levels

  13. Private Sector Credit Extension Source: SARB and own calculations

  14. Household debt to disposable income 59.4% 56.9% 50.2% 44.5% Source: SARB and own calculations

  15. Savings to disposable income of households 9.2% 5.4% 2.6% 0.5% Source: SARB and own calculations

  16. Balance of Payments

  17. Balance of Payments Source: SARS and own calculations

  18. Fiscal Policy

  19. Background Deficit Gold Surplus

  20. Investments and the Economic Cycle

  21. Consumption Expenditure Positive for retailers and consumer goods Source: South African Reserve Bank

  22. Gross Fixed Capital Formation Infrastructure boom Source: South African Reserve Bank

  23. Total Exports and Imports Trade Account Deficit Source: South African Reserve Bank

  24. Balancing Risk and Return

  25. 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

  26. Mining and Quarrying GDP at Market Prices Source: StatsSA and own calculations

  27. Mining Value of Sales Bull Run Inflation bracket Source: StatsSA

  28. Contribution of mineral groups to total value of mineral sales, 2006

  29. Resources: Price and PE Inflation bracket Source: I-net

  30. Industrials • Pro’s • Infrastructure development • Manufacturing drive (auto industry, etc) • Weaker rand support exports • Cons • Electricity supply • Slower growth?

  31. Manufacturing GDP at Market Prices Source: StatsSA and own calculations

  32. Manufacturing Value of Sales Inflation bracket Source: StatsSA

  33. Contribution to total value of manufactured product sales, 2006 Source: StatsSA

  34. Industrials: Price and PE Inflation bracket Source: I-net

  35. 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

  36. Finance, Real Estate and Business Services, GDP at Market Prices Source: StatsSA and own calculations

  37. Financials: Price and PE Inflation bracket Source: I-net

  38. Construction • Pro’s • Infrastructure boom (2010) • Interest rate cycle (Domestic and global) • Cons • Supply constraints • Electricity

  39. Construction GDP at Market Prices Source: StatsSA and own calculations

  40. Construction and Material: Price and PE Inflation bracket Source: I-net

  41. Asset Allocation

  42. Investment Options

  43. Balanced Portfolio

  44. www.efgroup.co.za