THE QUARTER ENDING 31st AUGUST 2017
The quarter ending 31st August 2017 has seen a recovery in the South African All Share Index and this is despite the local political turbulence. During this period, we have seen some of our shares recover even in this low growth environment. As a result of the ANC in-fighting, as well as character assassination across all political parties, the focus of the media on a daily basis is the persistence of political divisions within our country. This political status quo is likely to remain for the foreseeable future as the Presidency race heats up. This coupled with the recent mutterings of our Finance Minister, to use profitable State owned entities to prop up the debt ridden non-performing State owned enterprises, such as Eskom, should be viewed with concern as this would mean that ratings agencies would once again focus on our credit ratings.
The Rand continued to retain its relative strength despite the local political head winds, propped up by foreign investment looking for yields in our bond market in order to achieve income returns, as developed markets have seen low interest rates for an extended period.
On the International front, political turmoil continues to dominate the headlines. Theresa May, in her attempt to call an early election resulted in a spectacular own goal and a hung parliament, significantly weakening her power base and as a result, the Brexit issues are likely to continue to linger for the foreseeable future with very little or no concise outcome.
In the United States, Trump’s sensationalism and more recently hostile engagement with North Korea will be a focus in the short term, particularly given North Korea’s continued testing of nuclear weapons.
Notwithstanding all of the above political concerns, markets remained fairly robust up until the end of August.
In terms of commodities, the oil price has come under pressure throughout the year, as a result of strong inventory levels in the United States and a pickup in production has kept prices subdued globally. Other resources have come back into vogue which has benefitted resource backed economies of which South Africa is one.
It is with deep regret that we must inform you of the passing of Thelma, our wonderful Receptionist. Thelma’s passing was sudden and we would like to extend our deepest sympathies and condolences to her extended family and in particular her daughter.
THE QUARTER ENDING 31st MAY 2017
The quarter ending 31st May 2017 has seen a recovery in the overall All Share Index, despite the negative head winds caused by Jacob Zuma’s tenure as President. This has resulted in local confidence, as well as International confidence diminishing and has created a significant amount of instability in the political arena, both within the ANC and in corporate South Africa. Coupled with the firing of Pravin Gordhan, the appointment of Mr. Gigaba, as well as a number of other political appointments, links to a state of capture.
In spite of this, the Rand has been amongst the best performing emerging market currencies and inflows have been seen in to our bond market. We managed to avoid a down grade by Moody’s and as interest rates were kept on hold, International investors have been returning to the South African market, despite the risk, in order to achieve higher yields on deposit.
Internationally, President Trump creates sensationalist headlines almost daily, particularly in view of his relationship with the Russians and the fall out with the FBI. Again, notwithstanding the political state of affairs, the United States markets have performed well and as a result, commodity/resource backed economies are benefitting. A financially healthy United States is good for all global markets as can be seen from the recent highs. In Europe the bourses remain close to all-time highs and in particular the FTSE100, which regardless of a weak Pound, has performed well during the course of this quarter.
In the United Kingdom, Theresa May has brought the elections forward and this has been a very shrewd political move as she aims to get the required number of seats in parliament to enact her further withdrawal from the EU. It is a tricky time for the balance of Europe, as a number of these economic zones are questioning their association with the EU.
The oil price continues to be depressed as a result of the over-supply globally. Although the Russians and the Saudi Arabians have entered into discussions to reduce output, it remains to be seen as to whether or not this will have an effect on this oil price.
From a compliance point of view, as well as a tax point of view, we have seen significant changes to the trust tax landscape and this has impacted a number of clients in terms of deemed interest on any loans to trusts.
Common Reporting Standards (CRS) continues to be rolled out aggressively and all clients’ local and International accounts are subject to scrutiny and disclosures to the relevant tax authorities.
As a point of interest, we have recently established a relationship with Graham Dinkelman who is able to provide quality advice in long term insurance and we would encourage all clients to review these regularly. Please let us know if we can assist in this regard.
THE QUARTER ENDING 28th FEBRUARY 2017
The Financial year end was a volatile one as a direct result of local and global politics as opposed to market fundamentals. In South Africa the division within the ANC and Government Departments has caused international and local sentiments to be negative and, as a result, the year has seen increased outflows of foreign funds that were previously invested in South Africa’s stock exchange. The continued spat between Treasury and Jacob Zuma also poses a continued risk of ratings down grade by the international ratings agencies. Despite these pressures, our rand has performed well against the dollar and the pound. This is a result of resource backed economies coming back into favour as the base metal and oil prices recovered somewhat during the course of the financial year.
Having retained his post, Pravin Gordhan presented a budget that will have a number of effects on investors. Dividend withholdings tax was increased from 15% to 20% and the higher marginal income tax rate was increased from 41% to 45%. This, coupled with the earlier change to trust tax legislation (loans to trusts will now incur interest) is causing a significant amount of planning to be done on individual’s tax structures and investment portfolios. The very low growth environment in South Africa, recently revised to about 1.5%, means that the consumer is in for tough times with increasing expenses but lower income. Despite all the doom and gloom, the outlook for the coming year is more positive than last year, particularly given the recovery in the rand and the resource markets.
The political landscape internationally has had a noticeable impact on the major bourses with Brexit and the election of Donald Trump. The unraveling of the United Kingdom from their interaction with the EU is ongoing and has seen the pound weakened as a result of this political instability. In other areas in Europe there are referendums being held to determine whether or not some of these countries will remain in the EU, already affected by the departure of the United Kingdom. The United Kingdom itself has seen a dramatic increase in most of the FTSE listed 100 stocks and this is predominantly due to their dollar earning capacity.
The United States and the election of Donald Trump caused jitters around the world but despite his electioneering campaign, is proving to be a more pragmatic President. As a result, markets have reached all-time highs, given Donald Trump’s expansion plans, and a strong American economy is good for global growth.
The Chinese economy continues to grow satisfactorily with their focus on renewed growth which bodes well for resource backed economies.
On the compliance front, we have now seen the roll-out of CRS (Common Reporting Standards) and most clients have been updated in this regard with the submission of their tax numbers to the relevant investment and banking institutions. If you have any questions, queries or concerns around any of these, please do not hesitate to contact us directly.
I would like to take this opportunity to wish all of our investment family the very best for the coming financial year, which we know will be a challenging one but believe a positive one.
THE QUARTER ENDING 30th NOVEMBER 2016
The quarter ending 30th November 2016 has been a volatile one as a direct result of global politics as opposed to market fundamentals. By far the biggest factor has been the ‘Trump’ surprise victory in the United States, and markets have behaved tentatively in anticipation of the roll-out of some of his policies. Although the Trump presidency so far is very different to the Trump electoral campaign, it remains to be seen how these policies will affect emerging markets. Between Brexit, the Trump victory and our local geo-political environment, markets have been reacting to political news and in all likelihood, this is set to continue.
Locally, the stress within the ANC and the ruling National Executive Council and their division with regards to Jacob Zuma’s continued presidency has once again been the focus of South African politics. This negativity, combined with very flat growth in South Africa has resulted in many local companies reporting deflated earnings in in low growth environment. Despite the negativity, we recently managed to avoid a ratings downgrade. The rating agencies have lowered our outlook to negative and this should be of concern to our Government and country, as it would mean that the expense of borrowing would increase and our Rand could suffer. Local entities will struggle to raise International funding.
Internally, as discussed above, politics has been the main focus this year. Despite this, the American multi-nationals continue to provide good, strong returns in terms of dividend growth and, in a low interest rate environment, some of these shares are becoming particularly favourable as a result of this. The United Kingdom continues to struggle with the policies around Brexit and there seem to be further cracks appearing on the European Nations, particularly with Italy now making noises of an exit. The destabilisation in this region has resulted in the Euro dropping to its lowest value against other International currencies for some time. We could see more uncertainty visiting this region should further rifts occur.
It is with deep regret that we include in this newsletter the fact that Andrew Ewing passed away on the 20th November 2016. Andrew was the Founder, long time Director and non-Executive Chairman of Ewing Trust Company Ltd. His legacy and dedication to the business will be a motivating factor for those of us that remain for a long time to come. I would like to take this time to reflect on the huge, positive impact that Andrew had on so many lives in the legal and investment environment and we look forward to honouring his legacy of care, compassion and excellence going forward.
Our office will be closed from lunch time on 23rd December 2016 and will re-open on 3rd January 2017. We wish our staff and investment family a very happy and safe festive season.
THE QUARTER ENDING 31st AUGUST 2016
The quarter ending 31st August 2016 was one where locally the Borse and the Rand were reactive to the political pressures to which South Africa has been subject. The “fight” between Jacob Zuma and Pravin Gordhan continues to cause volatility in our currency. This discord and uncertainty impacts negatively on both local and international investor’s confidence, which can be seen from deterioration in the capital value of some of the domestic South African stocks. The losses the ANC suffered in the financially larger Municipalities may be a catalyst for some changes within the ruling party. Despite this however, in the short term it looks as though Jacob Zuma is entrenching himself further and has his eyes firmly set on the management of the SOE’s (State Owned Enterprises). This is the exact opposite of Pravin Gordhan’s mandate in his attempts to tighten the purse strings with the particular focus of stamping out corruption and the elimination of wasteful expenditure. Recently we have seen big business, including some of the larger financial advisory entities, ceasing investment into these SOE’s until they have clarity, transparency and effective controls put in place, and this shows good business support for Pravin Gordhan.
In spite of these combined efforts, the rating agencies, as a result of the instability and a downwardly revised growth forecast to less than 1% is causing focus to return to a down grade situation of the South African economy to junk status. This will have far reaching and negative effects both on the currency and on our market, as the borrowing costs of an already indebted Government will increase, and as a result thereof increase inflation. Treasury, spearheaded by Pravin Gordhan, will continue to focus on avoiding any downgrade and it remains to be seen how successful they will be during the next quarter.
In the United Kingdom the post referendum results and that of a surprise exit (Brexit) from the EU (European Union) caused extreme volatility in what is a fairly stable zone. The exit vote saw a weakening of both the FTSE100 and of the Pound which conversely caused the Rand to strengthen significantly, post our peaceful local South African elections. However, subsequent to this referendum vote, the decisive and swift action taken by the UK Government and their formation of a new cabinet, coupled with the Bank of England’s (BOE) good fiscal policies have seen the Pound stabilize and the FTSE100 increasing past pre Brexit values. The majority of the FTSE100 companies have a Dollar earning component, meaning that in Pound terms their earnings have been enhanced and with good yields available on some of these stocks versus a recently reduced interest rate, shares are now looking more attractive than deposit. Due to this, we believe the value of the FTSE may be supported for some time to come. There are numerous challenges facing the new Government under Theresa May, and the exit from the EU will not be a swift process, particularly when it comes to re-negotiating trade deals with other countries.
The United States continues to have robust earnings from their larger companies and the recent dovish tones from Janet Yellen with regards to interest rates show that there is unlikely to be a significant rise in interest rates in the short term. Despite this we could see continued Dollar strengthening, however, one must take into account the election race between Donald Trump and Hillary Clinton where we could see Dollar weakness during the run up to the United States elections in November.
The balance of the EU countries struggle to absorb much of the fallout from the refugee crisis, which has been a long and lingering process and unlikely to change in the short term.
China continues to grow albeit at a more moderate pace and as a result has had a knock on effect in dampening demand for resource and oil stocks. We believe that in the long term both the Chinese economy and the demand for resources will increase and correspondingly the recovery prospects in these sectors are good.
We have recently undergone a fairly intensive onsite inspection from the Financial Services Board (FSB) and I would like to take this opportunity to thank all staff and clients who were involved in this process, both pre and now post this audit. There are continued changes to our regulatory authority in South Africa with dissolution of the FSB and creation of two new authorities going forward.
The roll-out of Common Reporting Standards (CRS) also requires us to collect further tax information on all investors. Coupled with this there is a proposed roll-out of a voluntary disclosure program to be undertaken by the South African Reserve Bank and SARS from October this year. Investors need to ensure that their tax affairs are up to date as globally there will be a cross sharing of information between tax authorities from next year. We will continue to keep you updated on any tax or regulatory changes.
THE QUARTER ENDING 31st MAY 2016
The first quarter of the financial year has, as predicted, been a particularly volatile one with continuing political instability in South Africa in anticipation of the upcoming local elections. In addition, the perceived split between Finance Minister Pravin Gordhan and Jacob Zuma has added to this insecurity in both the political and financial sectors. Treasury, under Pravin Gordhan, has done an exemplary job of avoiding a further ratings downgrades which would have been extremely detrimental for the South African economic situation. The S&P’s (Standard & Poor’s) rating agency decided after close of business on Friday not to downgrade us to junk status, and congratulations must go to Pravin Gordhan and Treasury for their efforts in avoiding this. However, with elections looming and mass protests throughout South Africa we foresee further volatility in the markets, and the Rand.
Historically, we see weaknesses in local and global markets between now and the end of the next quarter. The focus of the ANC has been on electioneering not managing the political and economic crisis in which the country finds itself, causing some international investors to take a negative stance in investing in South Africa.
Despite the headwinds, the All Share Index recovered significantly during this period, predominantly as a result of the rand hedge nature of some of our biggest listed entities. An ongoing recovery in the oil and resource sectors as well as retailers and banks, lifted the bourse to close at 53905 at the end of the quarter.
On the international front, the United States and their focus on their Presidential election has resulted in very little change in their index, although earnings from the United States companies continue to be positive. In Europe, the possible exit of Britain from the EU (ie. Brexit) continues to make the Eurozone “skittish” in the run up to the referendum. The migrant crisis in a number of European countries continues to absorb much needed resources and despite the continuation of austerity measures, markets have remained fairly flat over the last quarter. However, there has been a recovery in oil and resource stocks.
Globally, we continue to focus on companies with strong financial statements and high cash reserves. We believe that over the long term it is prudent to follow these companies, in order to counter local and global inflation and almost zero earnings on deposits with international banks. It is the company’s perception that, although we are expecting a year of low capital returns, the focus on growth and earnings from the companies in which we invest will help in alleviating this inflationary effect.
The financial planning landscape is set to change drastically in the short term as a result of the pending dissolution of the current Financial Services Board and the appointment of two authorities in the future. The roll out of RDR (Retail & Distribution Review) is also causing uncertainty, as the impact of this Act is not yet fully understood and to this end there is significant engagement between the financial services industry and the regulating authorities. We will keep you updated on these developments.
Unfortunately, we have had ongoing problems with Telkom so if you are unable to contact us on the normal telephone number (031 7655 937) there are alternative numbers listed below that can be used:
031 765 7068
031 765 8949
031 765 6904
Our offices will be closed on Friday, 17th June 2016 to allow staff a well-deserved long weekend. In the event of an emergency, please do not hesitate to contact one of the Directors on the cellular numbers noted below.
THE QUARTER ENDING 29th FEBRUARY 2016
The Financial year ending has proved to be a particularly volatile one with most international bourses moving sideways over the last year, and slightly negative in the last quarter. The continued weakness in base metal and oils has significantly affected all resource based economies, of which South Africa is one. This has resulted in emerging economies falling out of favour with global investors. The oil price rebounded towards the end of the last quarter and we hope that this will indicate the return to some semblance of normality, both in the underlying oil and resource stocks. We have seen a recovery from the oversold positions in global resource stocks, and this bodes well for South Africa going forward.
The South African economy continues to teeter on the brink of a down grade from the international rating agencies. Despite the fact that for the time being our electrical outages have ceased, the political situation and the turmoil caused by the sudden change of Finance Ministers (twice), continues to draw negative international attention. In spite of the best efforts of Pravin Gordhan, the negative political situation could well result in a down grade during the second half of this year. During his budget speech, Pravin Gordhan changed little, bar capital gains tax, which have been increased for the next financial year. The balance of the budget speech made all the right noises, but it remains to be seen whether or not Pravin Gordhan has the power to implement these changes and curb the massive government spending that is currently taking place.
Internationally, the United States has retraced in value somewhat since its highs in November and December as a result of some concerns around the earnings of big industrial counters. The political situation in the United States continues to raise a few eyebrows, and it remains to be seen whether or not Donald Trump is able to gain further support. The European situation and the migrant and refugee crisis continue to put pressure on the European bourses, while the possible exit of the United Kingdom from the EU has caused not only the pound, but also the FTSE to retrace. All in all, political pressures have certainly had an effect on global markets.
The South African Stock Exchange reached a low at the end of January of 46282 but recovered somewhat towards the end of February. There is significant value in some of our favourite stocks, and good yields supported by strong earnings from our preferred companies. For the long term investor, the growth in dividends from these stocks provide satisfactory after inflationary returns. The Rand has strengthened to the major currencies but will continue to show extreme volatility, being such a thinly traded currency.
On a compliance note, we have had the roll out of TCF (Treating Customers Fairly) and shortly we will have the implementation of RDR (Retail & Distribution Review). This may have some effect on our clients and may require us to contact you with any changes which may be implemented by the Financial Services Board.
Another Act that has been rolled out globally is FATCA (Foreign Accounting & Tax Compliance Act) and CRS (Common Reporting Standards). This means that as Financial Institutions, we are now duty bound to collect all your tax information for both local and global investments. This information will then be shared with the local tax authority whose across-border sharing arrangement with global tax authorities means that everyone’s tax needs to not only be up to date, but disclosures made on all global investments. Our in-house tax department has been exceptionally busy collating all this information and ensuring that, wherever possible, client’s tax matters are current. Should you use an external tax consultant, please ensure that they have all the information they require.
I would like to take this opportunity of thanking not only my co-Directors, Gareth and Angela, as well as all the staff of Ewing’s for their service over the last financial year, and you, the client, for your invaluable support over what has been a particularly volatile period.
We look forward to being of service to you for the next financial year.
THE QUARTER ENDING 30th NOVEMBER 2015
As predicted, the quarter ending the 30th November 2015 has proven to be a volatile one ending with fairly negative sentiment. The continuation of this negative environment for resources has caused our economy, which is a resource backed economy, to come under pressure.
The negative trend over this quarter has continued to affect emerging markets and resource backed economies which has impacted on their underlying commodities, listed resource stocks as well as their currencies. Consequently, our rand has reached very low levels against the Dollar and the Pound Sterling.
The headwinds facing the South African economy continue to persist with particular focus on the rising interest rate environment. The Reserve Bank Governor twice increased the repo rate by 0.25% this year, in July and November respectively, and will in the short term cause further hardship for the consumer. The over indebtedness of the majority of our population has caused the most resilient businesses to feel the pressure which can be seen in the retracement of some of their share prices. Locally, the drought has also had a significant knock-on effect and may result in further unemployment.
Internationally, the stock exchanges have recovered from the sell-off of the last quarter and the juggling act facing Jack Lew, the head of the US Treasury, is going to be an interesting as there could be an increase in interest rates in the December period. However, the US market and the European market have proved to be robust and it will be of interest to watch whether or not austerity is continued from the European Central Bank.
Oil, like resources, continues to be under pressure and as a result oil companies globally have felt this negative effect.
On the positive side, the food retailers and industrial diversified companies globally continue to provide solid performances despite the short term volatility. We believe equities are still the place to be in the long term but one needs to be aware that exchanges, commodities and currencies remain extremely unsettled and we are in for some dramatic swings during the course of the next quarter.
On a more serious note, we have unfortunately had a number of attempted frauds where client’s emails have been accessed externally and emails have been sent from their personal email accounts instructing us to either transfer to third parties, or pay funds into unknown accounts. You may or may not have noticed that we have now implemented a call back policy, where for most email requests to pay a third party or unknown account, a phone call is made to you in order to authenticate the request. This may be fairly cumbersome but it ensures ongoing client contact as well as confirming the authenticity of the request.
Please note that our offices will be closed on the 11th December 2015 from 12.30am for the company Christmas party, and we will be closed from the 24th December until the 4th January 2016. In the event of an emergency, please contact one of the Directors on the following mobile phone numbers.
Iain Ewing : 082 459 2812
Gareth Collingwood : 083 467 7891
Angela Klynhans : 083 296 9010
As the end of the year approaches, we once again take this opportunity to thank you for your ongoing support during the course of 2015 and look forward to being of service to you in the New Year. We would like to wish you and your families a very safe, festive and peaceful Christmas season.
THE QUARTER ENDING 31st AUGUST 2015
The quarter ending the 31st August 2015, has been a negative and volatile one with the Johannesburg All-Share shedding about 4 percent over the course of the month. As predicted; continued and unprecedented volatility continues to be the main theme amongst commodities, currencies and countries.
The knock on effect of the Chinese devaluing the Yuan against the American Dollar has sent shock waves through the investment community and saw swings of up to 8 percent intraday on all on the international bourses. With a fall of this magnitude on the Monday and then a recovery during the week to end almost parity, the investor who sees the portfolios on a monthly basis would be see very little fluctuation, however the intraday moves have caused the advisors fairly stressful times. China continues to face headwinds with a change from external consumption of raw materials to the promotion of internal activities and as a result all resource backed countries and currencies have felt this negative effect. The US however continues to recover and the biggest problem facing them is whether or not to increase interest rates during the course of September.
Janet Yellen the head of the FED has a difficult task of deciding whether or not to increase interest rates, this will have the effect of strengthening the Dollar and being negative for global markets. However this can be seen in a positive light as the American economy shows robustness.
In Europe the migrant crisis and the Greek crisis continues to way heavily on sentiment and with a combination of China, the Greeks and the US we could see significant volatility heading into what is historically a weak time of year.
Local interest rates had a surprise increase under the guidance of Nene and coupled with a very low revised growth rate for South Africa coupled with the negative headwinds that persist in South Africa could see our Rand being further weakened. The drop in oil price has given “motorists” and “our economy” a bonus and in all likelihood we could see a further drop in the fuel price over the course of the next few months.
A note to all of you, we will be closing our offices on the 25th September and as some of you may or may not be aware we will continue with the role out of our Treating Customers Fairly (TCF) and look forwarding to being of service to you over the next quarter.
THE QUARTER ENDING 31st MAY 2015
The quarter ending the 31st May 2015, as predicted, has been a volatile one and has seen continued swings in all commodities, currencies and exchanges. In South Africa, the persistent employment crisis, coupled with the Eskom concerns, has caused international rating agencies to further hint that there may be a downgrade of the South African economy which could detrimentally affect how international investors not only perceive South Africa but also how they invest in our economy.
GDP (Gross Domestic Product) growth released at the end of the quarter highlights the deep rooted concerns with growth quarter on quarter, only achieving 1.3%. Our currency, despite weakness during the course of the quarter and in comparison to other emerging markets, has been less volatile but continues to weaken. Some economists and banks are now suggesting that there may be an interest rate increase towards the end of the year.
Internationally, the US continues to show growth and there is talk of interest rates being increased in the US during the course of this year, which may have a negative impact on equity markets globally. The Euro zone and the concerns around Greece continue to persist and going forward this may have an impact on equity prices in Europe. The Chinese stock market continues to power ahead, although some international commentators are starting to highlight concerns as they believe that this market, as well as others, may be overpriced.
The oil price has continued to recover during the course of this quarter and as a result, we are seeing a number of the oil companies regaining some of the losses.
The above table indicates growth in most markets, with the All Share closing at 52270. Although we believe that equity is the best place to be for the long term, we anticipate markets dipping during the next few quarters, which is good for first time investors as they will be able to purchase shares below where they are currently trading. For all our mature long term investors, we have seen these cycles before and our primary focus is to remain invested in those entities which have strong cash flows, as well as good dividend policies.
The (FSB) Financial Services Board which governs the financial services industry has implemented a new system called TCF (Treating Customers Fairly), as well as RDR (Retail & Distribution Review). Both of these will see significant changes in the industry and in this instance we are at an advantage as we have historically incorporated this philosophy in our business as the core focus of our interaction with clients. The primary focus of TCF is to ensure that all clients are being treated fairly, transparently and being given advice which is compatible to their requirements and circumstances.
Internationally, a new Act called FATCA is being rolled out which primarily requires all US passport holders to be registered for tax, irrespective of in which country they are domiciled. It is our belief that over the course of the next few years, this will be rolled out across all countries and further tax disclosures may then be a requirement.
We would like to thank you for your ongoing support in the first quarter of this year and assure you of our continued commitment to all our client’s financial and personal requirements.
THE QUARTER ENDING 28th February 2015
The financial year that ended on the 28th February 2015 continued to be a volatile but positive year and quarter ended with most exchanges globally closing at the top end of their recent trading ranges. Volatility seems to be here to stay with significant swings in the values of currencies, commodities and share markets taking place and most economists and commentators believe that volatility is now here to stay. What this means for first time investor is that, with patience, they should be able to enter the markets at reasonable levels but will require significant nimbleness. For the mature investor we believe that equities are the place to be for the long term, particularly in those equities that have strong cash flows and sound balance sheets and as a rand hedge element.
The JSE (Johannesburg Stock Exchange) ended at an all-time high of 53,344, driven mainly by the rand hedge companies and some of our local retailers. This is despite South Africa struggling with a lower than anticipated growth rate.
The South African incorporated stocks face continued headwinds with a particular focus on the interruption of the electrical supply as a result of the over-burdened Eskom network. This threat and the lower than anticipated growth rate has caused international rating agencies to hint that there may be a further downgrade of the South African economy. This downgrade could have significant implications and cause our rand to be more volatile. The rands weakness of late against all the major currencies is indicative of what has happened in most emerging markets and resource backed economies. Taken in context against other emerging markets the rand has not fared that badly.
The recent State of the Nation address added to the international negative perception of South Africa and we hope that after the recent budget, despite the “tax increases” that some semblance of respect may have been restored. Added to the South African consumer’s problems is the fact that the fuel levy increase has been fairly steep and inflation continues to be of concern, due regard being given to a very dry agricultural sector which may result in the increase in food prices.
The oil price continued to recover from the lows of $47.27 (Brent) during January to $62.18 at the end of February. However, there is the likelihood of continued volatility and, as a result, further impact on the fuel price down the line for the South African consumer. As a result in the dip in oil prices, emerging markets have come under significant pressure and we have seen, in most instances, these emerging markets move sideways over the last eighteen months. This is opposed to the developed market where, in particular, the United States continues to enjoy indices reaching all-time highs. The European situation is slightly more fragile and this is directly as a result of the Greek and the Greek’s inability to pay back debt borrowed. It will be interesting during the course of the year to see whether or not the Greeks decide to exit the Euro and what impact this has on the stability of this zone.
On the whole it has been a positive year for most investors and despite the volatility, we believe that equities are the place to be for the long term. As with the last financial year, we believe that this year will bring not only volatility but also opportunity.
We look forward to being of service to our clients going forward.
THE QUARTER ENDING 30th November 2014
The quarter ending the 30th November 2014 has been particularly volatile with the JSE (Johannesburg Stock Exchange) trading between 52,000 and in mid-October declining to 46,000, by the end of November clawing back to above 49911. These swings are to be anticipated at this time of the year and for the mature investor who has been through this before, it is something we have come to expect. However, for the first time investor, these swings (of more than 10% in some of the stocks) can cause jitters.
The effect of the recent strike action, combined with the higher cost of living, as well as our current account deficit, has unfortunately caused a number of international rating agencies to further down grade the South African economy. Our politician’s apparent lack of concern of the implications of these down grades are dire as it means that the international institutions and investors are unable to invest in South Africa in terms of their mandates, but it is important to take cognisance of the fact that we have not fared badly compared to other emerging markets. Volatility in the rand continues to be of concern and we have seen a slight strengthening (albeit relative) to the dollar and the pound. One needs to be aware that as we are an emerging market, these swings are likely to continue.
On the political front locally, serious concerns persist, particularly with a view of how our Parliamentary procedures are unfolding and the lack of respect shown both by the ruling party and by the opposition, as it reflects negatively on the South African situation as a whole. One sincerely hopes that both the ruling party and the opposition find some amicable means of restoring respect internationally.
The big news of the quarter has not been of South African making, but rather of the oil price which has plunged over 30% from the end of August to date. This has had massive implications for all economies. The drop is negative for the oil producers but may be positive for retailers, as economists believe that there will be more money in people’s pockets, as further falls in fuel prices are anticipated.
International markets have fared in a similar fashion, seeing lows in October but rebounding particularly in the United States to all-time highs. The FTSE in the United Kingdom has seen a slightly more sluggish rebound but continues to provide good yields. Resources and oils continue to come under pressure globally as a result of overproduction of oil and a continued cooling of the Chinese economy.
From a compliance point of view we have successfully rolled out and will continue to implement the TCF programme (Treat Customers Fairly), as well as focusing on new developments such as RDR (Retails & Distribution Revue). We will, as always, be keeping you informed of any new developments and may from time to time require you to update documentation during the course of this and the next financial year.
We would also like to take this opportunity to wish all of our investment family a very safe and festive season. We will be closing our offices on the 23rd December 2014 in order to allow staff to prepare for Christmas. We will be re-opening on Monday 5th January 2015. In the interim, if you have any urgent queries, please do not hesitate to contact one of the Directors, being Angela, Gareth or myself.
We would like to thank you for your support during this calendar year and look forward to the final quarter.
THE QUARTER ENDING 31st August 2014
The quarter ending the 31st August 2014 has seen the continuation of a divergence between the general South African economy and the Rand Hedge stocks which have led the JSE (Johannesburg Stock Exchange) to end the quarter close to all-time highs.
The continuation of recent strike action, combined with a higher cost of living has caused a major South African Bank, African Bank Investment Limited (ABIL) to default, which highlights the indebtedness of the South African population. This event, although particularly concerning, has had very little or no effect on any of our investments as we have specifically avoided this sector. Although there has been an effect on the South African economy, a positive to emanate from this collapse is that business and government have unitedly and effectively dealt with the fallout in order to avoid any contagion amongst the remaining banking and finance sectors. The Reserve Bank has taken over this “bad bank” and a conglomerate comprising of most of the big banks in South Africa has taken over the “good bank”.
Coupled with the pressure on the micro lending industry we have seen our food retailers, in particular Shoprite and Massmart, come out with disappointing results which show the tough times facing Southern African consumers. The Gross Domestic Product (GDP) is showing a positive but it is concerning that we do not have more growth in South Africa and as a bourse we are reliant on the Rand Hedge stocks to provide returns. The South African Rand has strengthened somewhat from the end of the last quarter although not materially and as a result it is unlikely that interest rates are set to change in the foreseeable future.
Internationally, notably in the US and UK, the markets have continued to perform satisfactorily where earnings are increasing and meeting expectations and as a result these bourses have fared well. Of concern is the amount of global conflict, in particular the conflict in Russia, Ukraine and the Middle East. This coupled with the likelihood that interest rates may rise has capped the continued strength. Concerns around the referendum in Scotland and its breakaway from the United Kingdom have also caused the UK market to be tempered.
On the political front, of concern, is the rhetoric emanating from the EFF and the perceived lack of control that the ANC has over this new party. However, some of the questions being asked by this new party of the ANC are proving to be very pertinent. One sincerely hopes that we will continue to be peaceful not only in Parliament but across the broader population.
Shares continue to be the asset class of choice as a result of the inflationary effect, specifically of an increasing fuel price and a weaker rand, but despite the volatility in the short term, any disposable income or cash deposits should be used to gain entry into our preferred stocks.
From a compliance point of view a new act has been promulgated, FATCA, which now requires that all tax information for investment clients be divulged. The focus is primarily on those of US citizenship, but we believe in due course this international act will require disclosure of South African investor’s tax affairs. It is incumbent upon all investment managers to highlight the fact that client’s tax affairs are up to date and that all local and global investment income is disclosed on their tax returns. We believe that, in due course, this will become one of the major disclosure requirements for all financial advisors.
For those of you who have been into our offices recently you would have noticed a significant refurbishment has taken place and this has allowed us to make more space available for meetings. We look forward to seeing you at our upgraded premises in the not too distant future.
THE QUARTER ENDING 31st May 2014
The quarter ending the 30th May 2014 has seen a tail of two markets with the general economy in South Africa struggling, highlighted in the recent Gross Domestic Product (GDP) numbers. This is a result of the extended and prolonged Platinum Mine strikes which has caused concern among the international community, along with a struggling farming and construction sector, coupled with the credit lenders e.g. ABIL bank and this has seen the local economy barely gain traction during the first quarter of this year.
As a result of the above, it is going to be a particularly difficult year for a number of South African companies. We believe that there are certain pockets of value within our favorite local stocks. Despite the negative headwinds facing the South African economy, our international dual listed stocks have continued to lift the local bourse to record highs.
In the last few days of the quarter we have seen the rand begin to weaken significantly. Our continued philosophy will be to hold diversified rand hedge stocks. However, there is consensus amongst the economists and stock brokers that we may be subject to a short term pullback. Contrary to this, there are significant amounts of cash sitting on the “sidelines” where new money is looking to find a home and, as a result props up the markets with shares being bought with this cash.
Locally interest rates remain unchanged, although with the weakening rand we may see inflation begin to have an effect on the economy and as a result, interest rates may rise. In the developed world, interest rates have been kept on hold coupled with the continuation of austerity measures has bought stability to these indices. Results from companies in the United States have shown a return to recovery which bodes well for the rest of the world. In the United Kingdom in particular we have seen strong continued growth, and in the euro zone, despite the concerns, positive sentiment persists with the IMF (International Monetary Fund) coming to the aid of Greece. Other international concerns that may affect global markets include the uneasiness with regards to Russia and the Ukraine, as well as China and Japan.
The political situation in South Africa has calmed somewhat since our peaceful elections and the reshuffling of cabinet, particularly with the new Finance Minister, is been digested and we will watch very closely how local and international investors react.
Again, the theme within the company is one of managing expectations as we do not believe the rapid increase in capital that we have enjoyed to date is likely to continue. Equities are “the place to be” for the long term, particularly with inflation likely to increase and therefore a stronger bias towards equities as opposed cash is encouraged.
From a compliance point of view we have seen the enactment and enforcement of TCF (Treating Customers Fairly) combined with POPI (Protection of Personal Information Act), both of these are aimed at allowing our investment family not only further confidentiality but also ensuring that we meet with the six outcomes of TCF. During the course of the next two years we will be updating the internal documentation, as well as contacting you, in order to ensure the compliance with both of these Acts.
As some of you may or may not be aware, we are delighted to announce the return of Gareth Collingwood to work. Gareth had a very unfortunate and freakish accident while fishing in the Durban Ski Boat Competition and sustained traumatic injuries. He has been in hospital recovering for the last five weeks. For those of you that know Gareth well, I am sure that you can appreciate that this fishing story [like his portfolio] is going to grow over time. Welcome back Gareth!
THE QUARTER ENDING 28th February 2014
The year ending the 28th February 2014 has seen the South African all share index again touching close to all-time highs. This is despite the headwinds facing the South African and global economies. Our local bourse has had both good capital and income returns during the course of the financial year and, in many instances has been propped up by weakening currency, which has lifted the rand hedge stocks.
The ongoing disruptive labour concerns continue to curtail international investor confidence and this is compounded in an election year. We have continued to see in some sectors of the exchange, foreigners being net sellers of South African stocks, particularly in the food retail sectors and banking sectors. Added to the withdrawal is the fact that the US and UK are perceived to be returning to positivity and on a rand adjusted view have proved to be a more attractive investment destination.
Internationally, central banks have continued their unorthodoxed monetary austerity measures and we have seen the appointment of a new US Reserve Bank Governor in the form of Janet Yellen who has a more dovish overtone than her predecessor, Ben Bernanke. Locally the surprise interest rate increase by Jill Marcus caused an immediate negative reaction in the bank and food retailers, and this highlights the concerns that Government has with the inflation as a result of the weakening rand.
Since the credit crisis of 2009 we have seen both excellent capital and income returns, and one of the themes in our investment sub-committee meetings is that of managing expectations. Although we believe that equities are the place to be for the long term, we are likely to see both local and international volatility and, we believe markets are going to provide good entry levels below where some of our favourite shares are trading.
The forthcoming year can only be described as one where investor expectations would need to be managed and we, as a team, believe we have seen not only phenomenal growth since 2009, but faced particular risks with regards to equity markets over the course of the next year. The recent high returns in capital are unlikely to be continued into the next year and volatility in South Africa, with the political situation, and globally with the likelihood of curtailing austerity measures, may cause international and local stock markets to be volatile.
From a compliance point of view we have recently seen the implementation of the “TCF” (Treating Customers Fairly) and while we have always had this engrained in our company philosophy, there may be a requirement during the course of the year to update and ensure that we implement the new requirements.
We are aware that some of you may have received a letter detailing the move of the law firm from our premises, along with a couple of other negative insinuations. We are aware of this letter and as all of our extended investment family knows, we focus on positivity and growth and have always focused on a culture of putting our clients first.
As all of our clients are now aware, Ewing Tax Services offers the service of drafting wills and winding up of deceased estates [this is so that we can continue to offer a holistic financial service to our clients] and, along with Ewing Trust Company, has enjoyed phenomenal and positive growth thanks to your continued support.
On an extremely positive note, I would like to take this opportunity of informing all of our extended investment family that Angela Klynhans has been appointed as a full operations Director of the company. I would like to take a moment to thank Angela for the enormous contribution she has made to the team, both in terms of the expertise with a specific focus on our pensions, retirement annuities and unit trust department, and with the spirit in which she has conducted herself. We look forward to Angela adding value in every facet of the business going forward. Congratulations Angela!
I look forward to the 2014/2015 year.
THE QUARTER ENDING 30th November 2013
The quarter ending the 30th November 2013 has seen the South African JSE sliding slightly from its recent all-time highs and closing below the May quarter end. The head winds faced in South Africa have detrimentally effected the South African corporate stocks, in particular the resource and mining sectors. As a result of this international negative perception of South Africa and the disruptive labour concerns that we witness every year, the South African situation has once again come under pressure from international investors selling South African assets with a view to switching back into more stable assets. This, in conjunction with the weakening rand, has resulted in a real negative return on the JSE in Dollar and Pound terms for the year.
With regards to international markets, the UK in particular, looks likely to end the quarter on a very satisfactory note and the current all share index is up 10% from the start of the year. Central banks in the UK, Euro zone, Japan and US continue with their unorthodox monetary policies, which has contributed to this growth. This may result in a bubble forming in asset prices which will be in danger should central banks change direction and interest rates begin to rise. So far, in developed markets, valuations can be described as reasonable, although they are obviously no longer cheap. The third quarter results, to date, have met with slightly lower expectations and, as a result, we have seen some sharp decreases in the favourite stocks listed on the FTSE100 in particular.
We wish you and your loved ones a blessed festive season and a prosperous new year.
THE QUARTER ENDING
The quarter ending the 31st August 2013 has seen the South African JSE ending at an all-time high of 42228, well above the May quarter closing of 42016. Despite the significant head winds that the South African economy faces and a de-valuing rand, the South African economy has been among the best performing emerging markets, and as a result, the portfolios under management have performed well. However, it is never nice to see our currency de-valuing at the rate it has, and although the portfolios have benefited, it is concerning that fuel and inflation are set to increase on the back of the weakening rand. This combined with the recent industrial action has South Africans again finding themselves in an inflationary environment, which may create continued instability and as a result, foreign investors may become more cautious.
31st August 2013
To date, international markets i.e. the US and the UK have out-performed the South African market which is predominantly due to a perception that the US housing market is returning to growth and some of the European countries are continuing to muddle through the recent Euro crisis. The above, coupled with the fact that there is an exceptionally low interest rate environment abroad, has resulted in equity prices increasing and the international equities have performed favorably. Internationally and locally, high dividend yielding stocks are finding preference amongst the international and local investors. The concerns looking forward include the Syrian issue which has caused the oil price to fluctuate wildly and should conflict occur, one could expect this to detrimentally affect international markets. This, together with further debt concerns around the European Union, the US debt ceiling and the revision of austerity measures may cause volatility during September and October. It is our Company's opinion, that where possible, one should look to add to high dividend paying equities.
Cash deposits and the interest rates are unlikely to out-perform inflation, as Government has hinted that there will be no increase in interest rates and consensus amongst the banks agrees with this. With inflation now breaching the upper end of the band i.e. 6.2%, the focus shall be on protecting the weakening rand. Government may be forced to intervene and one of the mechanisms available to them is the increasing of the interest rate. However, in South Africa, given the political environment and the fact that we are in an election year, it is unlikely that interest rates will move. As a result, funds on deposit will not out-perform inflation and it is therefore advisable in most instances to be invested in equities in the long term.
MIDMAR MILE CORPORATE CHALLENGE
It was a quiet day at Mafavuke House when Judd Reid popped
downstairs and announced that Ewing’s was going to enter
a corporate team in the Midmar Mile. That’s when the
banter started – who was going to swim and were the
girls in the team going to beat the boys?
The Fantastic Ewing Five team members:
We had 4 weeks to train for this 1mile (1.6km) swim across
Midmar Dam. Our aim in training was to complete 64 lengths
of a 25metre swimming pool, non-stop, and in less than 1hour.
Front crawl, breast stoke and doggy paddle was allowed and
anything in between, as long as we got through the 64 lengths
by the end of the 4 weeks.
Come race day the Fantastic Ewing ‘Four’ were
keen and eager, ready to take on the corporate teams –
then we saw the start and finish…1.6km in one LONG length.
It looks a lot further than 64laps of a 25metre pool.
Tracey and Judd had raced Midmar before, many years ago.
Liezl and Sally were first timers. Gareth took one look at
the expanse of water and decided the lifeguards already had
enough rescuing to do. We donned our green caps and headed
for the water with our race faces on.
A great race was had by all. Everyone finished and race times
were impressive, except for Judd, he didn’t receive
an official time. What a disappointment because now we’ll
never know if the girls beat the boys!
The atmosphere at the race amongst the swimmers and spectators
was brilliant and the organisation of the event was world
class. Ewing’s will certainly aim to make this a yearly
EWING TRUST SPONSORED GOLF DAY
We are pleased to announce the formation of the Lucas Association,
which is made up of professional firms in Lucas Drive which
will work together to service the financial and legal needs
of their clients, thereby offering them one-stop convenience.
For further information, brochures
are available from our
Would you like to review your
investment portfolio, obtain a second opinion or make plans
for your retirement?
We offer a free consultation with one of our financial advisors
- call us to arrange an appointment.