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This is the Sharenet company blog where we will bring you the latest news and events on the go at Sharenet, together with tips on using our site and our products.

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    Due Diligence

    Any investor owes it to themselves to perform some form of due diligence before making any investment decision. You may be wondering what constitutes due diligence, and what constitutes an investment decision.

    The amount of due diligence necessary is proportionate to the investment, (i.e. the greater the investment, the more thorough one needs to be in one’s due diligence). If, for example, you want to purchase a bedside lamp you would conceivably buy the first decent looking lamp that’s in your price range. If, on the other hand, you are planning on buying a house you will possibly take months searching the market, make numerous visits to places that you are interested in, take friends and family along to give advice, and negotiate with the seller until you feel you are paying a reasonable price.

    The same principles apply to financial products (shares, unit trusts, etc.). If you are making a speculative investment with a small portion of your net wealth, then your research isn’t as important as when you’re making a sizable investment.

    Seed makes it our business to research those investments where we place our clients’ money. In particular we visit and meet with the various asset managers, attend their presentations, and analyse their returns. We get a firm grasp on their thinking, and approach to managing money, and if their methods are agreeable with us, and their credentials are sound, we contemplate investing some of our clients’ money with them.

    In the last week and a half Seed has had meetings with four different asset managers, some one-on-one meetings with the managers, and others with a larger audience. In these meetings we pick the asset managers’ brains as to why they are buying certain shares, or positioning their portfolios in certain sectors, or reducing their equity exposure, or any other questions that are pertinent to that particular manager’s funds. We enquire as to the companies’ ownership structure (generally preferring owner managed firms compared to the larger institutions), staff changes (and reasons why there were additions or departures), size of assets under management, among other relevant questions. These all help us get a better feel as to how they manage money, and where their incentives are, etc.

    We look to include managers that will outperform, and discard those laggards. We combine these factors with our broader market overview, and then make decisions on whether we need to switch any of the investments based on the due diligence process.

    I trust this will also help you when you do your own due diligence on asset managers before making decisions.

    Seed Investment Consultants is holding a presentation on Investment Strategy and planning for private investors in Cape Town and Somerset West at the beginning of July. Please mail helena@seedinvestments.co.za for further details if you would like to attend.

    Kind regards,

    Mike Browne

    Permalink2007-06-29, 16:48:25, by Mike Email , Leave a comment

    Quiet Day For JSE


    The JSE has opened firmer this morning in what is expected to be a quiet day's trade. The US Federal Reserve left interest rates unchanged yesterday which most markets welcomed.

    The rand broke below R7.14 yesterday and is range-bound in early trade.


    Wall Street expects another shaky day ahead as investors await a flurry of economic reports due out today.

    European markets are lower this morning as investors look towards the US for some direction.

    Asian stocks have ended firmer today on the back of a weaker yen and the rate announcement in the US.


    BHP Billiton will continue their current on-market buyback of their shares during the close period from 1 July - 22 August 2007.

    Business Connexion's shares have dropped by more than 9% today after the Competition Tribunal announced that they are blocking the R2.4 billion takeover bid by Telkom.

    Hudaco Industries have generated diluted headline earnings per share of 248.6 cents for the interim period ending May. This is a big increase from the 172 cents declared a year ago.

    Permalink2007-06-29, 13:06:19, by Marika Email , Leave a comment

    JSE up fractionally at the close

    The JSE closed up 0.42% at 28403 with value traded at R 10.29 billion. Advances led declines 225 to 162 with 77 shares unchanged out of 464 active. Mining closed up 0.26% at 36504, while Industrials were up 0.46% at 23987 and financials ended the day up 0.62% at 23669.

    The best performing sectors of the day were Venture Capital up 9.4% at 190, General Industrials Index up 2.3% at 54063 and Mobile Telecommunications up 2.1% at 156, while the worst were Leisure Goods Index down 2.8% at 1970, Automobiles & Parts Index down 1.3% at 2485 and Forestry & Paper Index down 1.3% at 26952.

    There were 6 new 12 month highs today, including Gooderson which closed up 3.8% at 110, Yorkcor up 2.2% at 3450 and Didata up 1.3% at 810 while there were 4 new lows of which Gfields topped the list, down 1.3% at 11000, Anggold down 0.8% at 26585 and Delta down 0.1% at 1700.

    Of the major stocks Anglo moved down 0.48% at 41299, Mtn ended up 2.16% at 9695, Stanbank was off 0.72% at 9978, Gfields ended down 1.35% at 11000, Telkom ended down 0.55% at 17702.

    Biggest gainers of the day where Hwange up 50% at 225 , Wesizwe up 12.65% at 1015 , some of the losing shares included Quyn down 15.09% at 270 and Monyetla off 13.79% at 250

    The Dow was up 0.1% at 13442.52 and the S&P 500 up 0.2% at 1509.81 a few moments ago.

    Gold was up 1.1% at $ 649.25/oz

    The rand was last trading at R 7.08 to the dollar, R 14.18 to the pound and R 9.54 to the Euro.

    Permalink2007-06-28, 18:10:55, by admin Email , Leave a comment

    Wall Street Rallies


    The JSE opened higher this morning on the back of an overnight rally on Wall Street. Strong gains in Asian markets have also boosted the bourse. "Investors are more positive today thanks to strong overseas markets but they will still be slightly cautious ahead of the local PPI data released later today" remarked a Cape Town based dealer.

    The rand is firmer as emerging market currencies staged a recovery overnight. Traders expect the local unit to remain in a R7.08-R7.14/$ range today.


    Wall Street overcame a three session losing streak by ending higher yesterday. Stock futures point to a high opening today, ahead of the final reading of first quarter economic growth and the Federal Reserve's policy statement.

    European markets have opened positively this morning thanks to gains on Wall Street.

    Asian stocks closed higher today on the back of the rally in Wall Street. Energy stocks were boosted by oil prices nearing $71/barrel.


    Altech has signed an agreement to acquire ComTech Ltd, the fleet management company for their Altech Netstar Fleet Management Services for R90 million.

    Celcom Group has acquired the franchised Vodacom retail outlet Vodashop Kolonnade. It comprises a cash amount of R7.1 million and the issue of 1 850 000 Celcom shares to the vendors

    Argent, the steel merchant, has announced a 21.2% increase in headline earnings per share for the year ending March.

    Permalink2007-06-28, 12:56:22, by Marika Email , Leave a comment

    Market Wrap

    The JSE closed down 1.6% at 28285 with value traded at around R13 billion. Declines led advances 322 to 112. Mining shares closed off 2.45% at 36409, while Industrials were down 0.95% at 23877 and financials ended the day off 1.26% at 23524.

    The best performing sectors of the day were Leisure Goods Index up 4% at 2027, Mobile Telecommunications up 2.5% at 152 and Telecommunications Index up 1.9%.

    MTN bounced up 2,6% to 9490c. Reuters reported that MTN may build its own fixed line network.

    Vodacom is also looking to expand on the fixed line side, competing head on head in certain aspects with its 50% shareholder, Telkom.

    Telkom shares fell just 80c to R178.

    On a negative day the more speculative shares fell the hardest. New platinum entrants, Wesizwe and Eland were down sharply, at 901c and R83 respectively. Down 12,5% and 11,2%.

    Some of the larger cap shares also came down fairly sharply. Anglo fell 2,5% to R415

    Billiton off 3,3% to 19319c

    SAB Miller down 3% to 17940c

    Despite the negative day, 3 shares managed to trade up to a new 12 month high. This included ERM which closed up 12.2% at 220, Yorkcor up 1.5% at 3375 and Datapro up 1 c to 350c.

    The Dow was off 0.1% at 13329.77 and the S&P 500 up 0.1% at 1494.13 a few moments ago.

    Gold was off 0.6% at $ 643.05/oz

    The rand gained some ground last trading at R7.15 to the dollar, R14.29 to the pound and R9.61 to the Euro.

    Its on days like this, where global markets are under pressure, that investors often realise that they need an investment plan, and in some cases managers that can actually take advantage of these down days.

    Seed Investment Consultants is holding a presentation on Investment Strategy and planning for private investors in Cape Town and Somerset West at the beginning of July. Please mail helena@seedinvestments.co.za for further details if you would like to attend.

    Kind regards

    Ian de Lange

    Seed Investment Consultants is an authorised discretionary financial services provider to high net worth clients.

    Permalink2007-06-27, 17:58:20, by ian Email , Leave a comment

    JSE Sharply Lower


    Continued weakness in metal prices and losses in overseas markets have led the JSE significantly lower this morning. Investors are still concerned about inflation and the data released this week. The May CPI data (the measure used by the Reserve Bank for its inflation target) which is to be announced today, is expected to remain unchanged.

    The rand is slightly weaker against a firmer dollar and lower commodity prices.


    The futures market points to another weak opening for Wall Street today. Investors are still worried about subprime mortages and are looking ahead to the economic reports to be released ahead of the Federal Reserve meeting.

    European markets have also slumped today thanks in large to fears over rising interest rates.

    The Nikkei ended the day with it's fourth straight loss. Investors are concerned that the market might be overvalued compared to other markets.


    Senwes, the agribusiness group, has reported a 13% increase in headline earnings per share for the year ending April. This is one of the company's best operational results in years.

    Gold Fields has increased its stake in Canadian exploration firm GoldQuest Mining to 10.85%. They did this by acquiring 1.2 million additional shares by exercising warrants.

    Pietman Erasmus, who was due to retire next year, has brought his resignation forward to this year. He was the chairperson of Afgri and is paving the way forward for a new chairperson as the company plans restructuring within the group.

    Permalink2007-06-27, 13:16:49, by Marika Email , Leave a comment

    Currency Futures Launched by the JSE

    Last Monday (21 June) saw the launch, by the JSE Ltd, of currency futures, enabling the average South African, for the first time, to trade rand futures, and thus take a position on which direction they think the currency will move in. For the uninitiated futures are sophisticated instruments that trade on most major exchanges around the world. Futures allow participants to take a position on the price they think that a particular asset will trade at a pre-determined future date. They are regulated contracts with performance guaranteed by the clearing house.

    The JSE has had a futures exchange for sometime, but they have only recently been given permission to set up a currency futures platform. This occurred at this year’s budget presentation by Finance Minister Trevor Manuel, as part of the process of relaxing foreign exchange restrictions.

    Futures, as mentioned, are sophisticated products, and you should therefore only trade in them if you are properly educated in the mechanics of how they work.

    Who would want to trade in currency futures?

    Futures can be a useful tool both in hedging risk, or speculating about price movements.

    A South African who is committed to purchasing a yacht from the USA in 3 months time that costs US$ 100 000 would be one such person who may want to hedge out their currency exposure. They have a future liability that is denominated in US$, but their wealth is more than likely stored in Rand, thus exposing them to exchange rate fluctuations. For example, by entering into a 3 month, $ 100 000 futures positions at R 7.25/US$, the person purchasing the yacht would guarantee that he pays R 725 000 for the yacht. Had he not taken the position, and the Rand ended up trading at R 7.50/US$ at delivery of the yacht, then he would have to pay R 750 000, but if the Rand strengthened over the period to R7.00/US$, then his bill would only have been R 700 000. There is the chance of ‘winning’ or ‘losing’, but at least there is certainty.

    Speculators would enter the market purely to attempt to profit from short term movements. As all futures trading is ‘zero sum’ for every trade that ends in profit there will be a corresponding trade ending in a loss.

    Currency futures don’t form part of your R 2 million offshore allowance, so those high net worth individuals who have exhausted this allowance will be able to increase their offshore exposure by entering into a futures position. Individuals are able to enter into whatever size position that they can afford, but corporations need special permission from the Reserve Bank to participate. Contracts size start at a minimum of US$ 1 000, and participants are required to mark to market daily. The Yield-X is currently only offering ZAR/US$ contracts, but more currency offerings are in the pipeline.

    Currencies often act like wild of animals, with movements over the short to medium term being notoriously difficult to predict by even the ‘smartest’ of investors. It is therefore only recommended to those sophisticated investors who have a specific purpose for the future contract.

    For more information on currency futures try their website www.yieldx.co.za or contact your stock broker.

    Seed Investments tends to steer clear from overly complicated financial products. While futures contracts definitely have their place in the financial markets we at Seed Investments prefer to offer advice that looks at simplifying one’s investments, which will result in wealth creation over the long term.

    Kind regards,

    Mike Browne

    Permalink2007-06-26, 16:26:33, by Mike Email , Leave a comment

    Inflation Jitters


    The JSE has opened lower this morning on the back of slumping metal prices and a continued concern over inflation. Weaker overseas markets could see the market following suit today.

    The dollar is still on the defensive as the rand remains steady in early trade. Traders are uncertain as to how the local currency will react to the economic data due out later this week.


    Wall Street is set to open higher today despite closing lower yesterday. However, housing jitters could affect the market after various reports are released today.

    European markets opened lower this morning following Wall Street and a lack of other positive news.

    Most Asian markets closed lower today. A rebound in the yen hit exporters while investors are still worried about problems in the US subprime mortgage market.


    Naspers has reported a 39% increase in diluted headline earnings per share of 832 cents for the year ending March.

    Transnet has lifted their operating profit from continuing operations by 30% for the year ending March. Profit has increased to R6.3 billion and annual revenue is up 8.3% to R28.2 billion.

    Doug Murray has been appointed the Group CEO of Foschini. He has been with the group for the past 22 years.

    Permalink2007-06-26, 12:40:31, by Marika Email , Leave a comment

    Are Futures the Future? Or The End?

    With the Steinhoff directors recently taking out futures to the value of R489million over the company’s shares, the effects of this and the evidence of greater derivative speculation must be considered. The Steinhoff directors gamble joins the ranks of a growing number of directors that have opted for buying into these geared financial products over buying the underlying equity.

    I won’t go into all the details of the differences between buying shares as opposed to buying futures, but the point that I find most pertinent is the fact that futures are geared. Unlike shares where you can only lose the amount of money that you have invested, with futures you can lose more than your initial investment.

    Furthermore, futures are mark-to-market which means that at the end of each day money is either flowing into your account…or out of it. Short-term cashflows in the form of margins can cripple you if the market turns against your one-way bet and (in the words of Keynes) “…the market can be wrong longer than you will be solvent”.

    So, no matter what philosophy is thrown around, futures have a short-term element embedded in their very nature: your solvency.

    Although it may show a great regard for the (short-term) prospects of a company when its insiders opt for futures buying over just buying the equity, I question what the long-term effects of this will be on both the market and the underlying company.

    Firstly, because futures are geared, it means that if the market crashes then the directors could potentially become bankrupt. According to section 218 of the Companies Act, a person is disqualified from being a director (save under authority of the court) if they are an unrehabitated insolvent…which a bad bet on futures can do to a person.

    So, say you are a shareholder of Steinhoff and the market crashes, Steinhoff drops by 50% in one day…and this movement then makes the directors that went long on it bankrupt due to their futures gearing. Not only are your shares in Steinhoff now worth 50% less, but you now have shares in a company whose directors are disqualified from being its directors. Lacking a management team, it will no doubt crash even further, adding woe to woe.

    Secondly, bearing this in mind, I’m pretty sure that the directors will follow Steinhoff’s share price extremely closely. This will detract from their focus on managing the company to managing their own investments, i.e. costing shareholders money.

    Finally, although I like insider buying I don’t like the cowboy-like buying of futures by insiders. Given that this trend carries on gaining popularity with directors and eventually becomes the norm just before a large market crash, we could be sitting with an entire stock exchange with directorless companies.

    In closing I must add that I dread the day I see a director shorting his own share; I only hope that this doesn’t happen to any of the shares in my portfolio…

    Keith McLachlan

    Permalink2007-06-26, 08:52:43, by Marika Email , Leave a comment

    What are CDO's?

    Some news on international markets is the concerns about growing delinquencies in the CDO market. To a large extent the issues raised are a function of the world’s quest for higher yields. So just what ate CDO’s?

    CDO stands for Collateralised debt obligations, largely a US based phenomenon, and thought to exceed $1 trillion.

    Essentially higher risk debt of all sorts is aggregated, packaged into special purposes vehicles and then sold off as higher yielding debt obligations. These are essentially sold as higher yielding corporate bonds.

    Bloomberg reported that because there is little trading in these securities, an auction, which Merrill Lynch and Co is threatening, may confirm that these securities have been trading at expensive prices.

    The CDO market was created in 1987 by junk bond king, Michael Milken at US firm Drexel Burnham.

    They have exploded in recent years as higher risk debt is packaged and then parcelled off.

    In a post 2000 world, where markets peaked and then collapsed, investors have been on an ongoing search for yields. As the cost of debt reduced to their lowest ever level, large investors could essentially gear up and invest into higher yield, generating positive returns.

    Now as the cost of debt has increased, its starting to expose the weaknesses in the financial system.

    We will keep an eye on developments.

    That’s all for today

    Seed Investment Consultants is holding a presentation on Investment Strategy and planning for private investors in Cape Town and Somerset West at the beginning of July. Please mail helena@seedinvestments.co.za for further details if you would like to attend.

    Kind regards

    Ian de Lange

    Permalink2007-06-25, 20:57:30, by ian Email , Leave a comment

    Investors Eye Economic Data


    Concerns over inflation and weaker Asian markets has resulted in a lower opening for the JSE this morning. Local data due out later this week includes the May CPI data, PPI, money supply and trade data.

    The rand is slightly softer but is expected to remain in range (R7.09-R7.18/$) for the rest of the week. The dollar has come under pressure from lower bond yields.


    Wall Street looks set for a slightly higher open later today. However, last weeks poor performance, the upcoming housing numbers and the Federal Reserve's policy meeting are all obstacles for the market this week.

    European markets have opened lower this morning following the sell-off on Wall Street last week.

    Most Asian markets closed lower today. This came despite a weaker yen.


    Pinnacle Point Holdings Pty Ltd has been awarded a Seychelles government tender to build a R9.2 billion golf and casino complex in the archipelago. Work will begin in February.

    Hulamin, the specialised aluminium manufacturer, has made it's debut on the JSE today with a market capitalisation of more than R8 billion.

    Absa is set to increase the number of ATMs in under-serviced areas. Teaming up with Bytes Specialised Solutions, Absa aims to increase the amount of ATMs by about 1000 a year to disadvantaged areas in the next two years.

    Permalink2007-06-25, 12:45:55, by Marika Email , Leave a comment

    A top down investment approach

    Many investors adopt a combination of top down and bottom up investment approach.

    A bottom up investment approach is essentially taking the time out to kick the tyres of a company, run the numbers through the models, meet management, discuss with competitors and decide whether the company or more specifically the share has sufficient value in which to invest.

    A top down or macro approach looks at the bigger picture. Assuming a global mandate, an investor would first spend more time looking at broader macro economic issues such as:

    • Global interest rate directions and then down to a country level;

    • Relative growth rates of geographic regions;

    • Global themes such as a move to environmental friendly products;

    • Other themes such as an ongoing increase in telecommunications;

    • Movement of commodity prices;

    • Demographic changes in various countries;

    • Political themes. i.e. moves away from communism to democracy

    Many investment managers have an approach of marrying a top down approach to their bottom up approach. This week we spent time with at least 2 local fund managers who adopted this style.

    While in theory investing into companies that meet both the bottom up and top down criteria sounds excellent, in practice it’s often not that clear cut.

    Investment managers can spend a lot of time poring over data, theory etc and come up with a top down view of where the value should be, and still find that very little overlap with their bottom up analysis.

    Some managers are more diligent and place a lot of emphasis on their top down approach, while others concede that many shares in which they invest meet their bottom up criteria, but not necessarily their top down criteria.

    Many would also agree that their top down approach is more art than science.

    The managers that do have a good feel for the top down, combined with excellent stockpicking ability can produce very good results. Our view would be that the stockpicking ability would supersede top down edibility.

    Global markets came under pressure on Friday. Later Friday afternoon the screens showed only red.

    In the US private equity company Blackstone listed as the biggest IPS (Initial Public Offer) in five years, raising $4,1 billion. The demand has been big and the current owners of these companies are capitalising.

    That’s all for now

    Have a great weekend and enjoy the rugby.

    Seed Investment Consultants is holding a presentation on Investment Strategy and planning for private investors in Cape Town and Somerset West at the beginning of July. Please mail helena@seedinvestments.co.za for further details if you would like to attend.

    Kind regards

    Ian de Lange

    Permalink2007-06-22, 17:19:29, by ian Email , Leave a comment

    Mixed Market


    The JSE has opened slightly lower this morning as it reacted to mixed signals from overseas markets. Asia closed lower while Wall Street ended higher overnight.

    The rand is steady and should remain range-bound for the rest of the day. Traders are looking ahead to a slew of local economic data to be released next week.


    Despite a recovery in stocks overnight, Wall Street is set to open lower today. Concerns over rising bond yields continue to hamper investor sentiment.

    European markets have also opened slightly higher thanks to a positive close on US markets.

    Most Asian markets closed lower today. Investors cashed in on recent gains - leading the market lower despite a good performance in the tech sector.


    Famous Brands has sold it's coffee roasting business, Coffee Contact, to AVI's Ciro Alliances.

    The International Finance Corporation (IFC) is going to invest an initial $20 million into Blue Financial Services - the pan-African micro-financier listed on AltX.

    Permalink2007-06-22, 12:46:00, by Marika Email , Leave a comment

    Market musings

    The JSE failed to breach the 30 000 level – at least for now. On Thursday it fell back 200 points to 29309. Financials came back 1,3% and Industrials 0,7%. One day's movement does not a trend make. Especially when its quarter futures close out with R19 billion traded.

    The US markets are trading up, while Europe and UK markets also fell back on the day.

    The quarterly futures close out is the date that the futures prices are marketed to the underlying “physical” or spot market. The actual share prices – or various baskets – are known as the physical. The final value of the futures will depend on how the physical closes at the quarter ends.

    Participants in the futures market trade in the underlying physical to try and minimise the close out losses or maximise the profits on their combined futures positions.

    Scharrig Mining is involved in the mining industry. Today it reported results for the year to March with revenue more than doubling to R1,3 billion from R616m and operating profit up 96% to R297m from R151m

    Core EPS gained 49% to 103,9c from 69,3c

    The net asset value per share increased 95% to 468c

    These are big increases and give an indication of the current mining boom. The company also announced a joint venture with Merafe Resource, which will be known as Merafe Coal a 50/50 joint venture.

    The share price fell 12 cents to 2248, but has been on a tear in recent years from 250

    This has been a company with a strong owner managed culture.

    Some more large single stock futures after the massive Steinhoff director’s dealings. Today Digicore director, Esterhuyzen purchased 5373 contracts with a value of R3,9m in the Digicore shares.

    Alignment of interests with investing is very important.

    That’s all for now.

    Kind regards

    Ian de Lange

    Seed Investment Consultants is holding a presentation on sound Investment Strategy and planning for private investors in Cape Town and Somerset West at the beginning of July. Please mail helena@seedinvestments.co.za for further details.

    Permalink2007-06-21, 20:49:53, by ian Email , Leave a comment

    Softer Rand Leads JSE Higher


    The JSE opened higher this morning despite a weaker close on Wall Street overnight. "A softer rand and futures-related buying has lifted the market today" remarked a Cape Town based dealer.

    The rand is weaker due to a firmer dollar. Traders are also awaiting the release of the Reserve Bank's quarterly economic bulletin later this morning.


    Rising treasury yields resulted in a lower close in US markets overnight. This came despite a drop in oil prices.

    European markets have opened lower on the back of weaker US markets.

    Most Asian markets reached record highs at the close today. The yen weakened against the dollar which in turn strengthened export stocks.


    Safika Investments, a major empowerment private equity investor, has acquired a 26% stake in Chemimpo SA, the chemical distributor and agent.

    The gold sector is bracing itself for a strike after the country's three biggest gold producers failed to submit a wage offer yesterday.

    Johnnic Communications (Johncom) has reported a 36% increase in full-year headline earnings per share of 659 cents. They have increased their revenue by 17% to R5.4 billion to the end of March.

    Permalink2007-06-21, 10:52:34, by Marika Email , Leave a comment

    no BEAR markets

    I came across US money manager Ken Fisher’s latest report today. He has been bullish for some time, and for a variety of reasons, he is optimistic that this trend is likely to continue. Interestingly he gives the 2 main ingredients why he believes there will no bear market in shares at this point in time.

    He kicks off with a forecast saying if the cautious sentiment continues, then the MSCI World index is likely to return 10% plus.

    If however sentiment improves the upwards of 40% is possible.

    He says that bear markets require 2 main ingredients. The first is euphoric sentiment.

    The second is major negative fundamentals that emerge largely ignored.

    Both of these are absent. There is little euphoria and they assert that investors are not fully appreciating the numerous positive fundamentals in the global economy.

    In other words the market valuations are pricing in a lot of the negatives, but little of the positive news.

    He goes on to say that global shares are cheap. It’s a relative argument, but valid. Globally investors look at the forward yields on shares relative to a base case investment, normally bonds. Currently the forward yields on many stockmarkets are running much higher than the 10 year government bonds.

    Remember the yield is the inverse of the PE ratio, and often is easier to understand. The US markets are priced on a forward yield of 6,9% (PE of 14,5 times). Bonds are yielding around 5% and so the spread is around 2% positive for shares.

    This yield spread rises to 4% in Japan, France and Germany.

    This gap can narrow on 4 things. Share prices rise, interest rates rise or corporate earnings fall, or some combination of all 3. If the view is that globally interest rates are peaking, and corporate profits are not about to fall out of bed, then he calculates that share prices can rise some 70% before reaching parity with bond yields.

    Fisher is also a big proponent of supply and demand fundamentals for share prices. Supply of shares versus demand for shares is a major driving force. On balance supply of shares is shrinking and this is positive for share prices.

    2 main drivers of reducing liquidity are global merger and acquisition activity and continued share buyback programs.

    Some good points made.

    That’s all for now.

    Kind regards

    Ian de Lange

    Seed Investments provides investment management to high net worth clients. E-Mail ian@seedinvestments.co.za for a value proposition document.

    Permalink2007-06-20, 20:52:18, by ian Email , Leave a comment

    Miners Shine Today


    Firmer commodity prices and futures-related buying has led the JSE higher at the opening today.

    A dip in US treasury yields affected the dollar which slipped overnight. The rand is still firm in line with other emerging market currencies.


    Wall Street is set to open higher later today, following a strong performance in Asian markets.

    European shares have risen in early trade thanks to modest gains in the US and a spate of M&A activity.

    Hong Kong, Australia and Singapore soared to record highs at the close today as investors shrugged off interest rate fears.


    Transnet has sold their mortgage loan book to FirstRand for R1.4 billion. This is in line with the company's plans to sell off non-core assets.

    Omnia Holdings, the fertiliser and chemicals company, has reported a 58.4% increase in diluted headline earnings per share of 551.5 cents for the year ending March.

    Telkom is the first operator in South Africa to commercially launch products based on WiMAX - Worldwide Interoperability for Microwave Access. This is the technology that is used to connect Wi-Fi hotspots to the internet and provides a wireless extension cable for broadband access.

    Permalink2007-06-20, 12:15:00, by Marika Email , Leave a comment

    What is Your Number?

    A book written by Lee Eisenberg, called The Number, was published in 2006. It talks about what size cash an investor needs in order to retire. It’s getting to be very topical in the US, where baby boomers are heading into retirement years.

    Some of the stats presented are quite frightening, but not unexpected. He points out that millions are headed for retirement, but 40% have no retirement plan.

    25% of all workers aged 55 upwards have no more than $100 000 in invested assets.

    By drawing down around 4% of capital, an investor requiring an annual income of $50 000 to $100 000 will require $1m to $2m.

    The fact is that many investors have not been investors in the true sense, but savers. And while many have been good savers, the majority have been poor at it.

    Now wanting to retire at age 55 or 60, with another 30 years ahead, having only saved for 30 years, they are coming up short.

    One of the rules highlighted in the book from one observer is:

    " • To be “comfortable” – Living nicely though not flashily takes an annual retirement income of $50,000 to $100,000, which requires a nest egg of $1 to $2 million.

    • To be “comfortable+” – Having some frills, like a vacation cottage, requires an annual income of $175,000 to $250,000, or a $2 to $5 million nest egg.

    • To be “kind of rich” – Enjoying upscale trips and deluxe living takes $350,000 to $500,000 annually or a nest egg of $7 to $10 million.

    • To be “rich” – Living the glossy high life with resort homes and seats on corporate boards takes more than $1 million a year, or more than $20 million in the bank."

    Similar rules apply for the local market, but there is not one size fits all. Investors need to look at their current asset allocation, valuation of investments, strategy, retirement date, required retirement income etc and then do some modelling to ensure an optimal scenario.

    Kind regards

    Ian de Lange

    Permalink2007-06-19, 21:05:14, by ian Email , Leave a comment

    Market Awaits Futures Close-Out


    The JSE is flat in early trade as overseas markets have failed to provide any direction today. Investors expect volatile trade until the close of the local futures market on Thursday.

    The rand is firm as the dollar remains slightly weaker against world currencies. Traders expect the rand to remain in a R7.06-R7.13/$ range today.


    Wall Street is looking towards housing reports to give the market direction before the open later today. The market ended lower yesterday but the futures market indicates a flat to slightly higher opening.

    European markets have opened higher this morning thanks to strong forecast news.

    It was a relatively dull day on Asian markets as they followed Wall Street's lacklustre close.


    Remgro, the diversified investment group, have lifted their headline earnings per share by 37.4% (from 1052.3 cents to 1445.4 cents) for the year ending March.

    Omnia (OMN) , the fertiliser maker and distributer, has sold 10% of its company to their staff for R278 million in a BEE deal.

    Higveld Steel and Vanadium Corporation expect their half-year headline and basic earnings per share to jump by as much as 65%. Their share price increased by over 3% after they released this news.

    Permalink2007-06-19, 12:42:58, by Marika Email , Leave a comment


    At the market close, JSE stalwart, Remgro reported annual results to March. This is the form of the original Rupert controlled company, Rembrandt. It’s a holding company of many interests, and generated an increase in headline EPS of 37,4%.

    The company reports net asset value on a book value basis and intrinsic value, which includes assets at valuations. The latter rose from R157 per share to R221 per share. The actual share price closed at R187,60, and so still trades at a discount to director’s value of 15%.

    The company attached an annexure detailing the breakdown of the intrinsic value.

    The company owns listed investments with a market value of R35 billion and unlisted investments with value of R63 billion.

    Remgro owns an effective 10,4% stake in British American Tobacco, via its 1/3 holding in R&R. Remgro’s share of this company’s profit was R2,9 billion up from R2,3 billion in 2006.

    The BAT interests account for R52billion out of the R104 billion total intrinsic value.

    Firstrand and RMB another R22 billion.

    Rainbow Chicken, R2,8 billion.

    Implats R6 billion.

    Cash R4,4 billion

    It deducts a potential capital gains tax liability, assuming all the investments were to be realised of R2,7 billion.

    The company appointed Miss Maria Ramos as an independent non executive director on 26 March 2007. Mr Morobe was also appointed in this capacity today.

    Remgro owns 21,3% of Business Partners and is now an associated company.

    It also spent a further R197million to take up its stake in RMB Holdings to 23,7% from 23,1%.

    The share price closed up 110c to 18760c. This gives this company a market cap of R84 billion.

    It’s a widely held share, that has performed very steadily over the last few years.

    That’s all for today.

    Kind regards

    Ian de Lange

    Permalink2007-06-18, 19:30:29, by ian Email , Leave a comment

    Investors Look To Cash In On Profits


    The JSE opened stronger this morning on the back of gains in Asian markets. "Investors are hoping to cash in on profits after the market's stellar performance last week."

    The rand is firmer today as the dollar retreated on easing inflation data.


    Wall Street is set to continue it's rally and open higher today. US stocks surged higher last week as investors shrugged off worries about rising interest rates.

    London shares have opened higher on the back of various M&A activity.

    Asian stocks have closed higher today thanks to gains in export stocks and a weaker yen. Tokyo's Nikkei average reached a three-month high.


    Metorex, the junior mining firm, has announced that they are in talks that may have an effect on their share price. Their shares have surged by almost 6% this morning.

    Anglo American has plans to expand production and buy more assets to meet the strong demand for raw materials from China and India.

    BHP Billiton has resumed their plans for a $40 billion takeover of aluminium producer Alcoa.

    Permalink2007-06-18, 13:00:22, by Marika Email , Leave a comment

    Market Reaches New Highs

    The market today reached new highs yet again. This was on the back of the large cap shares posting strong gains. During the day Anglos, SABMiller, and BHPBilliton made new highs. Anglos (up 2.8%) and BHPBilliton (up 0.4%) are the two largest shares in the market, and dominate the market weighted index. SABMiller (up 2.4%) is the fourth largest company, behind Angloplat (which was up 1.5% for the day).

    Other Top 40 shares to post decent sized gains were Harmony, Implats, Investec (LTD and Plc), Liberty International, Lonmin, Mittal, Naspers, Netcare, Old Mutual, RMB, Sappi, Steinhoff, Sasol and Telkom. This represents nearly half of the Top 40 stocks. Woolies was the only share down by over 1%, ending the day at R20.60, off 3.7%.

    The market is currently in a sweet spot, and investors are undoubtedly filling their boots. Would it not make more sense to be slightly more cautious during this frenzy? Perhaps. But, like anything ‘cool’ no-one wants to miss out, especially when Mr Jones from next door just bought a new holiday house on the coast for his family, after his speculative investment paid off handsomely. How many times of late have you heard someone standing around the braai saying that they lost money in an investment? Not many I presume.

    All these pressures lead to one eventually jumping into the market. Now the market is generally a good place to invest, but note the word generally! We all know how dangerous it is to generalise. Generally applies to those who know how to invest, and those who know when to invest. If you have no idea what the market is or whether you should be buying or selling Sasol, then you have two options. Firstly you can educate yourself, and secondly you can pay someone else to invest for you.

    Many successful people will specialize in those activities that they are good at, and pay others to do those tasks that they don’t have as much ability in. I, for one, would never try and service my car, or build that swimming pool at my house. I curse when I have to pay hard earned money over to the people who do the job, but realize that if I did the job myself, it would a) take me away from making money doing my own job, and b) may end up in me having to pay more as I didn’t do a proper job, and the pool springs a leak. Get it done properly, first time!

    As sure as night follows day, there will be a time where the markets will turn, and this is the time where those investors who have a plan (and who have probably been ridiculed for being conservative) will be the ones coming out smiling. Compounding is a powerful force, but it works on the way down as well as the way up. Remember, if your investment loses 50%, you need to gain 100% just to get back to square 1. The investor, who has cash at the ready to take advantage of the 50% fall, will get a double whammy on the way back up.

    It pays to have a sound plan when it comes to investing. This plan should be robust enough to last through both up and down cycles. Seed makes it our job to look at investments day and night; we don’t spend time fixing cars, or trying to build our own swimming pools.

    If you happen to spend your time fixing people (doctors), or building houses (property developer) and don’t have time, or inclination, to draft a robust investment plan, stick to it, and monitor it regularly, but still want your investments to do well, then email Ian de Lange, ian@seedinvestments.co.za, and we’ll hopefully be able to steer you in the right direction.

    Kind regards,

    Mike Browne

    Permalink2007-06-15, 17:21:07, by Mike Email , Leave a comment

    Eland Soars By More Than 5%


    The JSE opened marginally higher this morning on the back of a positive close on Asian markets. "There isn't much local news driving the market today so we'll building on gains in the Asian markets for the rest of the day."

    The big performer of the day has been Eland, the junior platinum miner. Their shares rose by as much as 5.8% after a report hinted that they were involved in possible corporate activity.

    The rand is still steady and firm ahead of US CPI inflation data due later today.


    Wall Street is looking to extend gains for the third day in a row. Investors are, however, keeping an eye on several economic readings due today.

    Shares in London have opened higher after some M&A activity and Wall Street's higher close.

    Asian stocks rose to a higher close after shares in energy companies rose and the central bank left interest rates as is.


    Simmer and Jack, the gold and uranium company, has reported a diluted headline loss per share of 17.69 cents for the year ending March.

    Steffen Gilbert, Santam's group CEO, will step down from June 14 2007 and serve a six-month notice period. Ian Kirk will be his successor.

    Beige (BEG) has reported a 235% growth in headline earnings for the year ending March.

    Permalink2007-06-15, 13:17:43, by Marika Email , Leave a comment

    Why rational investing does not come easily

    Looking back today at some of the many papers that I accumulate, I came across a brief report on US fund manager Davis Funds, called The Successful Investor, in which they expand on Why rational investing does not come naturally.

    Some investors, private and professional, may be offended by this statement. But the reality is that for most investors, especially private their behavioural biases often negate the results of the actual investments.

    The rational approach to making money is very self evident – buy at low prices and sell at more expensive prices. Because it’s so simple and because EVERYONE employs this when buying their groceries, buying a car, selling a house, etc, they automatically assume that this methodology will come naturally to their investing process.

    Because very little thought is put into this, the reality is that when it comes to investing, and especially investing funds into listed equities, the reverse is often true. Investors tend to sell out at lower prices and buy at higher prices.

    What causes this irrational approach? Quite simply the emotions. Because investing is an emotional experience, most private investors invest more when they feel more confident.

    As prices in general fall, the emotions move from apprehension, to fear and then to panic. Maximum selling always occurs as the emotional panic is running high.

    Conversely as prices in general start to move up, the apathy turns to increasing excitement, then exhilaration, then euphoria. Again as the confidence level increases purely on the emotional impact, investors invest more.

    The cycle repeats constantly and will always continue to do so. The smart investors will take full advantage of the cycle. What will these investors have in common?

    1. a counter emotional discipline to investing, i.e. a process to remove emotions from the investment process

    2. A framework or overriding investment strategy and then an investment philosophy. i.e. not swayed by the hype of the moment

    3. A disciplined investment process. i.e. analysing intrinsic value and comparing to market prices. Rules for buying and rules for selling.

    Yes in boom markets, investors can jump onto the bus for a ride. There will always be wonderful stories of investors that put in R20 000 into Eland at R20 and watched it go to over R100 in a few months. I always say limit your speculation to 10% or 15% of your capital base.

    But some fun speculation aside, most investors want to compound up their capital wealth to the point where it is of a sufficient size from which to draw down a sustainable income stream in their retirement years.

    This does not happen by chance. Make sure that you have a plan to compound up your 85% - 90% as a rational and successful investor.

    Kind regards

    Ian de Lange

    Seed Investments advises and manages high net worth client’s wealth in a structured way for the long term. Mail me on ian@seedinvestments.co.za to get more information.

    Permalink2007-06-14, 17:22:24, by ian Email , Leave a comment

    Gains On Asian Markets


    The JSE opened firmer this morning on the back of a strong close on Asian markets. "Investors are cautious ahead of the release of US inflation data later today" remarked a Cape Town based dealer.

    Emerging currency strength has led the rand firmer in steady trade. This comes despite a stronger dollar. Traders expect the local unit to trade in a R7.20-R7.25 range for the rest of the day.


    Wall Street is set to extend it's gains from yesterday's session. Strong economic data fuelled the rise in stocks both in the US and overseas.

    European markets have opened higher thanks to the strong close in the US.

    Stocks rebounded in Asia, closing higher today. However, Chinese stocks fell after their Premier warned investors that "authorities would tighten their policy further to prevent the economy from overheating".


    First National Bank ( FNB ) is the National Supporter of the 2010 FIFA World Cup and has acquired 70% of Prebook. This is a company that leverages technology to increase the efficiency of the tourism and leisure sector businesses. This is part of FNB's aim to put the country's small to medium tourism businesses on the international tourism map.

    Maria Romos, Transnet's group chief executive, has announced that Transnet pensioners and their beneficiaries will receive bonuses totalling R125 million at the end of July.

    Telkom is planning on reducing their prices on their fixed-line broadband (ADSL) products by up to 38%. This is part of their price adjustment filing after they applied for an overall reduction of 1.2% on tariffs they charged for their products and services.

    Permalink2007-06-14, 13:30:12, by Marika Email , Leave a comment

    Telkom announces results

    Telkom announced results for its 50% held subsidiary, Vodacom and then also its own results for the year to March. These are big businesses in SA and globally. 12-15 years ago, the mobile businesses were only starting in SA. Now Telkom is a R92 billion company.

    At Vodacom total customers increased 20,1% to R23. Most of these are on the pre-paid packages with contract subscribers up 27,6% to 3 million subscribers.

    Traffic on the network increased 19,4% to 20,4 billion minutes!

    Revenue increased from R34 billion to R41,1 billion in 2007. Profit from operations at R10,8 billion up from R8,8 billion.

    Attributable profit rose from R5 billion to R6,3 billion. It’s a strong cash generating business and all profits are realised as cash flows.

    Telkom then reported its numbers for the year to March 2007.Total revenue was up from R48bn to R52,1bn. Operating profit of R14,4bn was flat and profit for the year down slightly to R8,8bn from R9,3bn.

    An ordinary dividend of R6 ordinary dividend and a special dividend of R5 per share was declared.

    On the back of these results, Telkom also announced price reductions across some of its service offerings as a marketing exercise. The strong demand for their broadband offerings has allowed Telkom to propose a reduced pricing in this area.

    Telkom now has over 250 000 ADSL customers. Clearly as the sole provider of fixed lines, with a combination of high volumes they can cut their margins slowly and still generate excellent profits.

    Telkom shares lost 1,9% to 17260c, making a recent high at R186,35c

    MTN shares gained 2,3% to R98. This company has a market cap of R182 billion. The 6th largest listed company on the JSE by market cap size.

    Didata has a market cap of R11,6 billion.

    Datatec at R6,9 billion.

    The JSE gained steady ground today after a slow start, ending up 1% at 28602. value was over R11 billion with 184 shares up against 217 shares down.

    Kind regards

    Ian de Lange

    Permalink2007-06-13, 17:55:19, by ian Email , Leave a comment

    Rising Rates In US Puts Damper on Market


    The JSE opened weaker this morning after higher interest rate fears swept over the US. Rising bond yields triggered this slump with markets around the world following Wall Street lower.

    The rand is also taking strain on the back of negative remarks about emerging currencies. Traders believe that the local unit should stay in a R7.26-R7.31/$ range today.


    Wall Street is set to open flat today as rising treasury yields affected world markets yesterday. Investors are worried about rising interest rates as this affects borrowing costs and therefore the price of stocks in general.

    European markets are lower today on the back of losses in the financial sector.

    Tokyo's shares fell slightly at the close today. Most Asian markets have been affected by the imminent rate rise.


    Vodacom's profits (with net profit after tax) have increased by almost 28% to R6.56 billion for the year ending March.

    Telkom has reported a 1% decline in headline earnings per share to R17.107 for the year ending March. This is due to a decrease in operating profit as a result of an increase in operating expenses.

    Johnnic Communications (Johncom) expect their full-year headline earnings per share to increase by about 40%.

    Permalink2007-06-13, 12:50:34, by Marika Email , Leave a comment

    News headlines can cause investment problems

    There is so much information floating around today that it gets more and more difficult to make decisions. You may say the contrary is true, and it should be, but the reality is that investors are often paralysed by information overload.

    Part of the problem is really the noise factor, where the financial media is to blame. I have discussed this noise factor before, but its worth looking at from a different angle.

    Just a snippet of headlines today included:

    . Dow little changed versus the euro and the yen.

    . Bank of England’s (Mervyn) King boosts sterling – talking about the possibility of higher interest rates

    . US – China tension – talking about China as a currency manipulator.

    . Energy stocks weaken at open

    . Bond prices continue to fall

    . Gold futures edge lower in early trade

    Unfortunately headlines are like averages – they can have the effect of hiding the detail. The best investment decisions are made at the detail level.

    What do you mean by this? Well speak to an astute property investor, and he will tell you that while interest rates are up slightly and demand is down, he will continue to look for properties that he can buy at lower than generally going prices.

    A value investor will say the same thing. Prices tend to move with far more volatility than their underlying values. Price volatility around a truer valuation of a company allows investors to buy assets when they are cheap and sell when they are more expensive.

    Hedge fund managers will even combine this action in one fund, always trying to generate a positive return irrespective of market direction. Locally, they will spend the bulk of their time looking at assessing company valuations, working their models and then comparing to prevailing prices.

    An investor need not get every single investment 100% correct in order to generate wealth over time. Rather an investor needs to have a defined process to ensure that the odds are stilted in his favour. Then if practised consistently, the investment process will be rewarding.

    Don’t ignore headlines, merely discount them. Like astute investors, rather spend your time making sure that you have an investment strategy.

    Seed Investments works with high net worth investors on their overall investment strategy. Mail me if you would like to discuss further.

    Kind regards

    Ian de Lange

    Permalink2007-06-12, 17:10:02, by ian Email , Leave a comment

    Investment Due Diligence

    An article in this week’s Saturday Argus Personal Finance spoke about the due diligence that could have saved many from the Fidentia disaster. So what is this due diligence and does it have any relevance when it comes to investments? The answer is a definite yes.

    Its surprising how many people who would ordinarily take a lot of time to make a decision that has any financial implication, very often perform little or no due diligence whatsoever when investing hundreds of thousands or millions.

    The are various reasons for this including;

    1. the investment idea comes from a friend, and they therefore see no reason to question any further
    2. the salesman has such a good story, they an investor questions the necessity of asking any more questions.
    3. it’s a time consuming process and investors are busy.

    Despite, the many regulatory bodies, there are still far too many incidents of financial disaster. The introduction in recent years of legislation under the auspices of the Financial Services Board seems to have done very little for investor protection.

    My view has always been that investors must do their own due diligence. So exactly what does this mean.

    . it’s about asking questions.
    . it’s about getting accurate answers that corroborates with other evidence.
    . it’s about checking some or all of the information provided.

    This must occur before any capital is parted with.

    If you are using an advisor or manager of your investments, then it’s vital that they have a process to select and check on underlying investments or fund managers:

    As an investor you need to ensure that they have:

    . a process to evaluate the quality of the fund manager
    . a process to review and benchmark long term performance.
    . have regular meetings with managers or management
    . a process to review the structure of the investment.
    . a ranking process for the universe of investment options.

    As an investor you would expect your advisor to perform initial and ongoing due diligence, but this is unfortunately seldom the case. Often it’s a hit and miss affair. In times where asset prices have moved up dramatically many omissions are hidden, but this will not always be the case.

    Do your own due diligence and get the best available

    Kind regards

    Ian de Lange

    Seed Investments is a registered financial services provider to high net worth investors.

    Permalink2007-06-11, 20:11:28, by ian Email , Leave a comment

    Rand Strengthens


    The JSE has firmed today after ending lower on Friday. Wall Street's rebound prompted this rise and investors are looking towards overseas markets for further direction.

    The rand is steady and is looking to strengthen later today.


    Wall Street is set to open lower today. Last week's aggressive sell-off is still affecting the market which looks to recover later this week.

    European markets have opened higher on the back of positive deal news.

    The Nikkei ended slightly higher today thanks to export shares rising in a response to gains in US shares on Friday.


    Telkom's shares rose by as much as 5.8% in early trade today on the back of rumours that a special dividend or an approval of an acquisition could take place. Telkom plans to buy out IT company BCX.

    AngloGold Ashanti Ltd has sold most of their assets from their closed Ergo waste treatment operation for R42.8 million.

    Judy Dlamini has been appointed chairperson of Aspen, Africa's largest generic drug maker.

    An Employee Share Ownership Agreement (Esop) has been implemented by Impala Platinum. This involves around 3% of the company's equity worth more than R1 billion at their South African operations. This aims to "provide long-term investment opportunities for employees and enables them to share in the future growth of Implats".

    Permalink2007-06-11, 12:44:32, by Marika Email , Leave a comment

    Market Wrap

    Higher interests rates around the world hit global markets on Friday. The local JSE was no exception with the JSE All Share index falling 1,35% to 28169. Gold shed 2,8%, Financials down 1,79% and Industrials down 1,27%. Value traded remained high at over R13 billion.

    Market sentiment turned negative on global worries as bond yields in the US spiked up above the 5% level. This was their biggest spike up in 3 years and was due to concerns on rising global inflation.

    The local rise in the repo rate on Thursday by 0,5% which pushed up prime rate to 12,5%.

    The market was decidedly negative with only 99 shares trading up against 341 shares down on the day.

    Tiger Wheels came out with a very negative trading update. After separating this business now owns 74% of the ATS Group, which is the global alloy wheel manufacturing business. The loss for the year to end of June is expected to be in the region of 235 c per share at the headline level. The share price has been under some pressure and lost 12% to 800c.

    This gives the company a market cap of just R05 billion.

    AME - African Media Entertainment reported interims to 30 April with headline EPS up 35% to 121c per share. The share price raced up 5,4% to 2699c

    Sappi fell 3,6% to 12099c

    CMH share price fell 2,6% to 1850c

    Asian shares fell back on overnight US markets. On Friday however the US markets bounced up and in the afternoon were trading up into positive territory.


    Ian de Lange

    Permalink2007-06-08, 20:06:41, by ian Email , Leave a comment

    Global Inflation Fears


    The JSE slipped lower at the opening this morning. This comes after both US and Asian markets fell over the increase of borrowing costs as global inflation becomes a real fear.

    The rand fell to below the R7.30/$ range. Weaker emerging markets, the firmer dollar and a lower gold price added to the local unit's woes.


    Wall Street closed lower yesterday as investors embarked on a sell-off which has taken more than 400 points off the Dow Jones already. The futures market points to a lower opening today - following the trend in overseas markets.

    European markets are trading lower this morning on the back of interest rate worries.

    Asian markets closed lower today as investors were concerned about higher interest rates affecting their exports to the US.


    Truworths International has bought back 14.5 million shares for R366.6 million between the period October 2005 and June 2007.

    Tile and sanitaryware retailer and distributor Illiad's shares are up by more than 5% in early trade today. This occurred after the company issued a cautionary statement which hints that someone may be making an offer for their entire share capital.

    Jonas Bogoshi has been appointed GijimaAst's new group CEO.

    Permalink2007-06-08, 13:03:51, by Marika Email , Leave a comment

    Another Rate Increase!

    Following market consensus, the SARB increased interest rates by 0.50%. Tito Mboweni, the Reserve Bank Governor started off his statement by indicating that CPI-X had breached the upper end of the inflation target for the first time. This was mainly a result of fuel and food price inflation, but was also buoyed on by generalised increases in other categories.

    As I mentioned in my previous report, there is nothing that The Governor can do now that inflation has gone above the targeted band, but he must still keep an eye on the outlook for the medium term, making decisions now to influence inflation in the future.

    Petrol inflation was at 15.5% year on year, and food at 8.6% year on year in April, with grain and meat inflation both over 10% for the year. Household consumables were also above the 6% level, coming in at 8% for the year.

    Mr Mboweni then moved on to the outlook for inflation, which has deteriorated when compared to the previous forecast. The model that the Reserve Bank uses takes into account current trends in the prices of goods, forecasts of some of the inputs (exchange rate, price of oil, etc) and possible shock events. CPI-X is expected to dip below 6% in the third quarter of this year (as a result of the high base from August last year that I mentioned previously), this is the only respite, as the SARB is predicting that CPI-X will be above their mandated range for three of the coming four quarters.

    With most people are following the public sector strike, the impacts of a final decision will have an impact on inflation. If the unions settle for a wage increase close to 6%, then the effect will be minimal (and may actually be negative as a result of increased productivity). If, however, the unions get their way, and wage settlements are closer to 12% then this will have a knock on effect onto inflation. Wage settlements averaged 6.5% in 2006 and remained at this level in the first quarter of this year.

    The current account is still at a high level, but has narrowed as a result of the country needing to import less oil in the first quarter of 2007. While the exchange rate is trading at similar levels to the last couple meetings.

    South Africa’s decision is in line with the European Central Bank’s ( ECB ) decision taken yesterday. The ECB increased rates by 0.25%. As of writing the Bank of England (BoE) hadn’t come out of their meeting. They are currently meeting to decide what to do with UK rates, but consensus is for them to also raise rates by 25bps. The first world countries (US, UK, Euro and Japan) tend to change rates by 0.25%, whilst emerging markets are usually required to make larger 0.5% or 1% decisions.

    That is all for this evening. I hope that the increased rates don’t put too much of a pinch on your home and other loan repayments.

    Kind regards,

    Mike Browne

    Permalink2007-06-07, 17:27:12, by Mike Email , Leave a comment

    Market Awaits Interest Rate Verdict


    The JSE opened slightly higher this morning as investors look towards the interest rate announcement later today. The market has ignored a weaker close on US markets but remains quiet in muted trade.

    The rand is steady as traders also await the 3pm announcement by the Reserve Bank. The local unit is expected to trade in a range of R7.10-R7.21/$ today.


    Wall Street is set to open higher today. The market closed lower yesterday as interest rate concerns sparked off a sell-off. Investors will be watching several sales reports from retailers and the 10-year yield that crossed the 5% threshold for the first time in 10 months.

    European markets are mostly higher this morning. Banks and carmakers have boosted the market amid interest rate concerns.

    A weaker yen helped the Nikkei to a moderately higher close while Chinese stocks continue their gains after a last week's shaky performance.


    Sun International aims to buy back up to 16% of their own stock for around R2.34 billion.
    This will "result in the maximisation of returns to shareholders through a more optimal balance sheet structure".

    First Uranium's acquisition of Mine Waste Solutions has been unreservedly approved by the Competition Commission.

    Sanlam's group businesses (excluding Employee Benefits) has grown in the first four months of 2007. They have reported an overall increase in gross new business flows in excess of 25%.

    Permalink2007-06-07, 12:39:39, by Marika Email , Leave a comment

    What Decision is the Best One?

    Yesterday I looked at some of the factors affecting the decision making process going on at the current MPC meeting, I also looked at what the Reserve Bank is mandated to target, and some of the pitfalls that face them.

    Coupled with the problems that Tito Mboweni faces (only having power to affect South African interest rates and demand, whilst the demand dynamics are global) is the timing issue. Any decent economist will tell you that there is a lag from when data suggests that policy (interest rates in this case) should be changed, to when it is actually changed, and finally when the changes are ultimately felt by the general public. This is often where consensus ends, however. There are many theories on how long the time period is from when data shows that changes should be made, and when the changes are actually felt. There are also widely varying views on how much government intervention helps the economy, in what ways it helps the economy, and even whether it does help the economy! There is research that shows that government policy actually has a detrimental effect (although these days there is research to prove anything!)

    In practical terms, if you are currently struggling to meet your bond repayments, and interest rates go up a couple of times, you will try and make a plan to find the extra money to cover your payments rather than sell your house, and buy something slightly cheaper. You may be successful in squeezing savings out for a year, but there may come a point when you can’t manage anymore and are forced to sell, and buy something cheaper, only to see rates begin to stabilize or fall the following quarter. Your actions will thus be out of kilter with policy, which isn't optimal.

    Many economists feel that the inflation threat first appeared a couple years ago, and that steps taken then are starting to be felt only now, and only over the next few months. They point to the fact that from August CPI-X will fall significantly due to the high price-index base from the previous year. The impact of the four interest rate increases in 2006 are now being felt with car sales slowing (although there is the argument that the implementation of governments eNatis system had a significant effect on car sales). Car sales is generally a leading economic indicator, meaning that the effects of the rates hikes have made enough of an impact.

    There is a school of thought that with the SARB mandated to keep CPI-X between 3 and 6%, coupled with the fact the CPI-X broke the upper band meaning that the Reserve Bank will be under pressure to be seen to be doing something about it, with a resultant 0.5% rate increase. With eleven out of eighteen economists polled by Reuters believing that rates will increase at this meeting, with five of them expecting another increase in August. Economists are often wrong with their predictions, and so not too much should be read into these numbers.

    The current account deficit also poses a risk to inflation. The fact that we are heavily reliant on foreign capital inflows to fund our expenditure, means that we are precariously position should that capital flow dry up. If the flow does slow, the exchange rate will weaken, which brings on its own inflation pressures.

    As can be seen the decision isn’t an easy one to make, and even when a decision is made the success or failure of that decision could very well be out of the Reserve Bank’s powers. This is where it becomes important to analyse and measure the likely ‘shock events’ that will have exogenous effects on inflation.

    That’s all for today. We wait in anticipation for Tito’s decision and speech tomorrow. Let’s see what decision he makes, and the reasoning behind that decision.

    Kind regards,


    Permalink2007-06-06, 16:51:53, by Mike Email , Leave a comment

    Nervous Market


    The JSE has opened slightly lower this morning as investors remain cautious ahead of the interest rate decision tomorrow. "Weaker overseas markets haven't given us any direction and the bourse should remain in this range until the announcement tomorrow."

    The rand is also unchanged from yesterday's levels. Traders expect the local unit to remain range-bound (R7.12-R7.22/$) for now.


    The Dow and S&P pulled back yesterday from record highs on the back of concerns that the central bank would raise interest rates later this year. Wall Street is set to open lower and extend losses today.

    Asian markets closed mostly flat today. Japan's Nikkei was affected by falls in the export sector and property companies. China, however, continued it's rise as the market calmed after reassuring comments by the central bank.

    European markets have opened mostly lower this morning as investors also look ahead to the European Central Bank's decision on interest rates.


    De Beers reported that their Diamond Trading Company sales had reached $6.15 billion in 2006. This is the second highest figure ever achieved by the company.

    South African Airways has had to pay over R100 million in total to the Competition Commission. This follows their price-fixing and travel-agent incentive investigations last year.

    For more company news click here...

    Permalink2007-06-06, 12:19:04, by Marika Email , Leave a comment

    MPC in a Quandary

    The Monetary Policy Committee (MPC), headed by our Reserve Bank Governor Tito Mboweni, will be heading into their two day meeting tomorrow where they will, among other things, decide on whether they should hike interest rates, or leave them at current levels. They face, as usual, some tough questions, and will incur the wrath of certain parties no matter what they decide to do. Tito Mboweni is, in some ways, in a similar position to Jake White. Damned if he selects Luke Watson and damned if he doesn’t. There are always going to be parties out there with their own vested interests.

    Exporters favour a weaker rand, while importers prefer the rand to be strong. It is impossible to please both parties.

    As with any economic decision there are MANY variables that need to be analysed. The SARB needs to decide whether they should be targeting growth or inflation, which factors have an impact on growth and inflation, how important those factors are, whether their decision will make an impact on growth/inflation, and the list goes on…

    The first question is whether growth should be targeted or whether inflation should be monitored. A subtle mixture of both can also be targeted. China is a country who has been targeting growth, but is now worried about the consequent effects it has had on prices (inflation). They are thus trying to balance the effects of growth and inflation.

    There are commentators out there who have been calling for the SARB not to worry too much about inflation, that they should rather make the aim GDP growth. These pundits argue that by raising rates the Reserve Bank is stifling growth, and preventing job creation, they argue that a little inflation never hurt anyone… (Extending the Jake White analogy, most people think they can choose a better Springbok team than Jake). It is worth noting that no-one else has the authority that Jake and Tito have in calling the shots. They live and die by their decisions, and will thus put their all into making the correct decisions.

    The MPC has been clearly mandated to keep CPI-X (a measure of inflation that excludes mortgage payments) in a range of 3 – 6%. They have been successful in keeping within this range for what seems an eternity, but the latest data to come from Stats SA indicated that the upper level (6%) was broken in April. The higher CPIX is a result of higher prices, and in order to get it under control convention states that you should raise interest rates, thereby ‘forcing’ the population to spend more money paying off their debt (which we know South Africans’ have in ample supply), and consequently resulting in the average Joe have less money in his pocket at the end of the day to spend on other consumables. This lower demand on goods results in prices stabilising (or not increasing as quickly), and inflation falling back into the targeted range!

    The problem arises when demand for products isn’t local demand, but in fact global demand, as is the case with agricultural and oil prices. If Tito raises interest rates, we may have less to spend on food and petrol, but in the greater scheme of things how important is South Africa’s demand for these products? When the US is using their maize to make fuel, and sugar being used in other parts of the world to make ethanol, the fact that we’re shopping for food at Pick n Pay instead of Woolies, doesn’t make much of a difference to the price of bread. In this scenario if the SARB raises rates, people spend less on food and petrol, but the price of food and petrol carries on going up. If they leave rates unchanged, people will have more money to spend on food and petrol, but they will have to pay more for these items as well. In both circumstances nobody wins.

    As one can see these decisions are often more about damage limitation than gambling on getting the best result, but risking a massive fall out.

    I will look more at the MPC meeting in tomorrow’s report, and then we will try and analyse their decision on Thursday, and how it affects the man in the street.

    Have a good day.

    Kind regards

    Mike Browne

    Permalink2007-06-05, 18:08:43, by Mike Email , Leave a comment

    Gains On Asian Markets


    The JSE opened firmer this morning on the back of strong metals prices and gains on the Asian markets. The market remains uncertain (especially banks and retailers) ahead of the interest rate decision on Thursday.

    Local traders don't expect the rand to move out of it's current range (R7.11-R7.16/$) until the Reserve Bank makes it's decision later this week. Economists expect a 50 basis point increase in the repo rate to 9.5%.


    Wall Street is set to open higher today after the Dow and S&P reached new records at the close yesterday. Fresh deal news and a rebound on Chinese markets have boosted the market.

    Telecoms stocks and banks have led European markets higher this morning.

    The Nikkei 225 index closed above 18 000 for the first time in 3 months - largely thanks to exporters.

    Chinese shares ended up after government announced that they might take steps to restore investors confidence.


    Telkom Media has appointed Connie Molusi as chairperson.

    Ansys Limited, the engineering and technology company, has won a R11.7 million Transnet contract contract. This comes on the eve of their listing on the JSE's AltX on Thursday.

    South African Airways (SAA) has embarked on a restructuring plan which involves unbundling into seven subsidiaries. They're hoping to achieve a R2.7 billion turnaround over the next 18 months or so.

    Permalink2007-06-05, 12:14:31, by Marika Email , Leave a comment

    Soggy start to the week

    The JSE closed down 0.36% at 28838 with value traded at R 9.59 billion. Declines led advances 262 to 150 with 69 shares unchanged out of 481 active. Mining closed up 0.71% at 36960, while Industrials were off 1.08% at 24244 and financials ended the day down 0.97% at 24536.

    The best performing sectors of the day were Leisure Goods Index up 2.7% at 1992, Travel & Leisure Index up 1.7% at 5275 and Platinum Mining up 1.3% at 107, while the worst were Venture Capital down 5.3% at 176, Household Goods down 4.9% at 121 and General Retailers Index down 2.9% at 35010.

    There were 26 new 12 month highs today, including Teal which closed up 25% at 3500 on very small volume and 2 trades, Sabvest up 12.5% at 900, Sable up 11.1% at 3999 and Palamin up 5,3% to 8640c.

    Of the major stocks Anglos gained a further 185c to R437, Billiton put on 1% to 17820c, Implats up 2,2% to 22595c, while JD Group shed 5,1% to R78.

    Some of the top gainers included Teal up 25% at 3500 , Monyetla up 18.33% at 355 , while the major losers were Village off 17.95% at 160 and Tawana off 15.15% at 140

    The Dow was down 0.2% at 13644.22 and the S&P 500 down 0.1% at 1535.13 a few moments ago.

    Gold was up 1.1% at $ 673.75/oz

    The rand was last trading at R 7.11 to the dollar, R 14.16 to the pound and R 9.58 to the Euro.



    Permalink2007-06-04, 17:26:42, by ian Email , Leave a comment

    Weaker Rand Lends Support


    The JSE has opened flat this morning. "Investors are holding their breath for the Reserve Bank's interest rate decision later this week," remarked a Cape Town based dealer today. "Shares dependant on the interest rate should trade cautiously ahead of the announcement." The bourse was slightly affected by a weaker close on Chinese markets but the weaker rand should prop up exporters.

    Emerging market currencies have been affected by the drop in Chinese markets. A strong bullion price is supporting the rand which is slightly weaker. Traders expect the local unit to still remain range-bound while it waits for the US markets to open.


    Wall Street is set to open lower today. A sell-off in Chinese stocks and political tension between the US and Russia has added to this outlook for the day.

    Profit taking has led European markets lower this morning.

    Chinese markets have fallen by more than 8% (the largest fall since February 28) as investors are still jittery after the government increased trading tax last week. Tokyo shares, however, closed higher as data was released showing that Japanese companies increased their capital spending.


    Alexander Forbes has more than doubled their headline earnings per share from continuing operations to 120 cents for the year ending March.

    Datatec (DTC), the JSE-listed international information and communications technology group, has acquired Carotek's information technology division (based in North Carolina) for $6.9 million.

    Private equity group Brait has increased their full-year earnings by 10%. This has largely been as a result of a good performance by the firm's specialised funds unit.

    Permalink2007-06-04, 13:02:45, by Marika Email , Leave a comment

    Market Wrap

    The local JSE started the new month on a solid footing, up 1,1% for the JSE All Share index. Gold gained 2,1% as global markets all gained ground. Volumes were high at almost R11 billion with 251 advances against 149 decliners. Again lots of shares at new highs, including heavyweight Anglos.

    Anglo announced today that it is mailing details of its demerger and public listing of its paper and packaging subsidiary, Mondi. This will be in the form of a dual listed company, Mondi Limited a South African company and Mondi plc, a UK incorporated business.

    This has potentially been on the cards for some time, but with new management at Anglo, it is speeding up the focus on core mining. The strategic review of Anglo was announced in October 2005. Plans were then put in place for the demerger.

    The company was founded by Anglo American in 1967 and expended into Europe in the 1990’s.

    Anglo shares remain on the up, gaining 2,5% to 43650c

    Mr Price came out with very good numbers for its year to the end of March on Thursday. The market loved them, taking the price up 4,99% to R32.

    The company has increased trading space by 19% in the last year. It has however been increasing the size of its stores. Sales were up by 24% to R6,1 billion. The chain owns Mr Price, Mr Price Home, Miladys, Sheet Street and in the last year opened Mr Price Sport and the franchise division.

    Diluted headline EPS increased 19% to 183,6c per share. The distributions were increased 25% to 101c for the year.

    Alexander Forbes released its annual results to March. These were surprisingly strong. The business has been under some pressure and is the subject of a private equity buyout at a price of R17,26 per share. Shareholders approval is still required, which will take place in mid June.

    The price closed unchanged at 1675c

    Metropolitan announced that Prof Wiseman Nkuhlu has been appointed as chairman effective 1 June. The share price gained 4c to 1629c

    That’s all for today

    Have a great weekend and enjoy the rugby


    Ian de Lange

    Permalink2007-06-01, 17:44:40, by ian Email , Leave a comment

    Resources Lead JSE Higher


    Firmer commodity prices and a weaker rand has led the JSE higher at the opening today. Gains in the Asian markets has also strengthened the bourse.

    The rand is slightly weaker this morning as more buyers are in the market for dollars. Traders are looking ahead to the release of US non-farm payrolls later today.


    Wall Street is set to go from strength to strength as it continues its rally today. Strong earnings reports and the expectation of a good job report should boost the market.

    European markets have opened higher today ahead of potential strong US data. Firmer metal prices have led miners higher this morning.

    Tokyo shares ended higher on the back of a strong performance by exporters.


    Discom, owned by New Clicks Holdings, is set to be sold to Edcon for R369 million.

    Wiseman Nkuhlu has been elected as the chairperson of Metropolitan Holdings Ltd. This position takes effect immediately.

    Adcorp Holdings is in the process of a broad-based black economic empowerment transaction worth R512 million. This results in 25% ownership by their new BEE partners.

    Cullinan Holdings have reported a 5.3% increase in their headline earnings to R12.6 million for the six months ending March.

    Permalink2007-06-01, 12:39:23, by Marika Email , Leave a comment