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Current Market View

Unit Trust investing should generally be viewed on a medium to long term basis. Our market view seeks to reflect this, and is updated when we perceive that conditions warrant it. View previous market reports below.

13 Feb 2012 : Looking back and looking forward

Most investors, not to mention fund managers, will be pleased that 2011 is over. It was a year of high levels of political uncertainty coupled with devastating natural disasters, particularly in Japan . Political change in North Africa/ Middle East, the threat of Greek default, persistent talk of Euro-zone collapse and squabbling politicians on Capitol Hill made for a difficult investing year.

A glance at the Emerging country returns for the year (see below) shows that investors who sought relief from the uncertainty of Developed market stock exchanges and opted for Emerging market investments may have come off second best. At the beginning of 2011, many fund managers promoted investing in emerging markets during 2011, pointing out the population growth rates, low country debt: GDP ratios, GDP growth and so on.

But as we know that there is a low correlation between low GDP growth and equity out-performance.

Those market commentators willing to stick their necks out (always a thankless task) predict that 2012 will bring more of the same investor uncertainty as the underlying problems which were the cause of 2011 volatility have not gone away. Although there seems to be greater resolve amongst the Europeans to find solutions to their problems, high levels of unemployment, particularly amongst the youth, aging populations, increasing debt and reduced growth will not make their task easy.

On the other hand, expectations for growth have reduced and are currently more realistic. In short, people are bracing themselves for the ‘new normal.’

In South Africa we are entering 2012 with the average Price /Earnings ratio of the JSE at about 13, compared to this time last year when the JSE (PE) ratio on the FTSE/JSE all share was around 17 and close, historically, to the top-end of JSE share valuations. According to Seed Investments, the long run average price paid per R1 of earnings is R11,50. The average between 1990 and 2009 for R1 of company earnings was R14,38. So a fall to 13 bodes well for future performance.

Unit trusts are designed as long term investment vehicles and it is not advisable to change an investment strategy based on 12 month returns. We know that successful investing involves the disciplined and patient execution of long term plans. Nevertheless, it is always interesting to review and evaluate the performances of different asset types and investment strategies .

It is clear that in 2012 we face many possible scenarios. Given the wide range of outcomes the only sensible strategy is for investors to stick to their long term investment plans and for fund managers and direct investors to remain stock focused.


SA Listed Property was the best performing asset class (8.93%), followed by Bonds (8.80%), Cash (5.71%) and Equities ( 2.57%) over the 12 month period ending December 30th 2011.

According to the Equinox website*, the leading Real Estate Unit Trust was the Nedgroup Investments Property Fund with a performance of 10.86%, followed by the ABSA Property Equity Fund with a performance of 9.81% and the Momentum Property Fund with a performance of 8.66%.

Leading bond funds included the Stanlib Bond Fund with a performance of 9.91%, the Allan Gray Bond Fund with a performance of 9.42% and the Oasis Bond Fund with a performance of 9.34%.

The leading Domestic Equity fund over the 12 month 2011 calendar period was the Momentum Small/Mid-Cap Fund, managed by Evan Walker and mandated to invest in smaller companies, with a performance of 12.31%. Ranked second was the Nedgroup Investments Entrepreneur Fund managed by Anthony Sedgwick and also mandated to invest in smaller companies, with a performance of 10.38%. In third place was the Allan Gray Equity Fund, a general equity fund, with a performance of 10.23%.

2011 could be described as the year of the stock picker. This was not a year where index funds or index-based Exchange Traded Funds outperformed actively managed investments. According to the Equinox website, 41% of the general equity funds, including the index trackers, underperformed the JSE All Share Index.

Some of the most successful domestic unit trust funds during 2011 were those classified in the Asset Allocation category.

According to the Equinox website* the three leading funds in the Asset Allocation Flexible category were the 360ne Flexible Opportunity Fund with a performance of 16.56%, the Visio Actinio Portfolio with a performance of 13.74% and the Rezco Value Trend Fund with a performance of 12.73%. Asset Allocation Flexible funds are mandated to invest across the asset allocation spectrum; their only restriction is that 75% of assets should be invested in South Africa at all times.

Funds in the Targeted Absolute and Real Return category should not really be compared or ranked, as they are managed according to different risk strategies and aim to achieve different outcomes. Some aim to beat inflation, others aim to outperform cash. Both of these targets proved difficult to beat during 2011.

Asset Allocation Prudential funds turned in a wide range of performances, with funds in the Prudential Low category (mandated to invest 40% or less in equities) with the most number of funds with performances in double digits. Worst performers were the funds in the Prudential High category. Generally, the funds in the Prudential Variable category fared better than the funds in the Prudential Medium category. Prudential Variable funds are mandated to invest between 0% and 75% in equities, while Prudential Medium funds are obliged to invest between 40 and 65% of their portfolios in equities.


The winning sectors of the year however, were foreign funds. South African registered foreign equity funds, bond and property funds, particularly those exposed to UK and US markets (which performed relatively better than European and Emerging markets) outperformed primarily due to rand weakness. In a weakening rand environment, investors in funds mandated to invest in foreign bonds were the winners of the year. The seven funds in this category on the Equinox platform turned in 12 month calendar performances ranging from 31.56% to 12.99%.

Foreign equity funds had mixed performances. Funds with relatively higher performances favoured investing in the UK and US, above Europe, Asia and Japan. The Nedgroup Investments Global Equity Feeder Fund which turned in a performance of 21.15% had a 36% exposure to US Equity and 18% exposure to UK equity, and reduced exposure to emerging markets and Europe for the period under review.

Conversely, the Sanlam Asia Pacific Fund of Funds, a fund mandated to invest primarily in Japan and Asian Pacific developed markets with a small part allocated to the so-called emerging Asian Pacific markets, turned in a performance of -9.47%.

All foreign fund performances benefited from a weakening rand. Careful selection of bonds by foreign bond fund managers enabled them to were able to invest in good quality debt at high yields. Translated back to rands funds in the foreign bond sector turned in performances ranging between 31.56% and 12.99%.

Asset class returns for 2011

JSE All Share Index (Total Return including divs): 2.6%
JSE Price Return (excluding dividends): -0.4%
JSE Top 40: 2.2%
JSE Mid Cap Index: 4.7%
JSE Small Cap Index: 1.1%
All Bond Index: 8.8%
JSE SAPY Property Index: 8.9%

Developed Market Returns

French CAC40 Index: -16.2%
German DAX 30 Index: -17.5%
Hong Kong Hang Seng Index: -17.3%
Japan Nikkei Index: -12.9%
UK FTSE 100 Index: -2.9%
US Dow Jones 30 Index: 8.4%
S&P 500 Index: 2.1%
Nasdaq 100 Index: 1.9%

Emerging Market Returns

Brazil Bovespa: -27.1%
MSCI China: -18.2%
MSCI India: -27.2%
MSCI Russia: -19.3%

Source: Absa Investments

*The Equinox platform currently lists just over 500 of the industry’s 953 unit trust funds. While we acknowledge that this is half of the funds available, we do have the majority of the established funds as well as the leading boutique funds. All information on ranking of funds should be understood in this context: we do not record the daily prices of all the funds in the industry. Furthermore, PSG Asset Management Administration Services has started the process of reducing the number of funds on offer in order to offer a more cost effective service to clients.

According to statistics provided by the industry body, ASISA, (Association for Savings and Investment South Africa) the market capitalisation of the domestically registered unit trust industry is R960 billion. The funds on our platform have a combined market cap of R770 billion; 74% of the industry.

Previous Market Views
Click on title to view.
09 Dec 2011 Smaller funds dominate fund rankings over five and three years
10 Nov 2011 The top ten funds on the Equinox platform measured over a rolling 12 month period, ending October 31st include seven funds mandated to invest offshore, two domestic funds mandated to invest in gold and precious metals and a worldwide technology fund.
10 Oct 2011 World Economic Outlook updated to September downgrades expectations for GDP growth for emerging markets to 6.1%.
04 Aug 2011 The second quarter was dominated by what appeared to be dis-connect between forecasts for the US economy which were mostly negative, and earnings estimates which continued to be in line with or above expectations.
17 Jun 2011 The month of May was dominated by investor concerns about the global economic growth path, as most leading global economic indicators recorded soft readings.
23 May 2011 In the SA market the month of April recorded strong asset class performance across the board with Listed Property the top performing asset class and up 3.71% for the month.
10 May 2011 The higher than average exposure to offshore assets detracted in March, but this position is in line with our long term view that the valuation of developed market equities are more favourable than emerging market equities.
15 Mar 2011 February’s international equity market performance statistics were again characterised by the outperformance of developed equity markets.
11 Feb 2011 The most interesting feature of international equity performance statistics in January was the outperformance of developed markets compared with a loss in the emerging markets.
14 Jan 2011 Equity returns in 2010 came in at 18.98 %, some 6% ahead of consensus forecasts at the beginning of the year - driven to some extent by the fact that actual earnings growth exceeded forecasts by 4%.
09 Dec 2010 Intervest Fund of Funds market summary: The November correction in risky assets was mainly driven by investor fears that the Chinese government would pursue an overly restrictive policy to cool markets. Nevertheless, there are opportunities offshore.
13 Aug 2010 Less than 4 weeks ago there was much risk aversion in financial markets and bearish market commentators were widely quoted in the financial press. How quickly things changed over the course of the month!
02 Jul 2010 There is much caution out there. 2008 is still in the minds of many investors and it seems this isn’t going away soon.
07 Jun 2010 Last month we posed the question whether investors should “sell in May and go away”? The answer (in hindsight of course) was YES.
06 May 2010 Sell in May and go away? Many investment managers are asking themselves this question and must be pondering whether to lock in some profits after the powerful rebound in global equity markets.
23 Apr 2010 Indices have rebounded significantly off their lows of just over a year ago and, on the face of it, valuations are no longer compelling based on historic earnings.
30 Mar 2010 Market returns for 2010 we believe, will be more subdued and definitely lower than in 2009.
22 Feb 2010 It is currently incredibly difficult to have conviction about the likely short to medium direction of the stock market.
25 Jan 2010 The current favorable investment environment may well result in equity markets that overshoot fair value.
14 Dec 2009 There are still potential credit threats which could pose a greater risk to the global recovery. The mountain of cash the sidelines has ensured that stock market corrections have been short lived thus far
10 Nov 2009 Market corrections may be muted and markets could continue grinding higher. But it is clear that the easy money has been made and that there is ever-increasing risk in entering the markets at these levels.
13 Oct 2009 Consensus view is that markets are overdue for a correction, therefore markets will grind higher – because markets always behave the opposite of consensus.
10 Sep 2009 Numerous concerns remain. It is too early to differentiate sustainable demand from restocking demand
12 Aug 2009 Given the rapidity with which markets have moved higher, it would not be surprising to have a fairly sharp correction – most likely when more of the money on the sidelines has been pulled into the market.
08 Jul 2009 China's economic data continues to suggest that government stimulus is having a positive effect
07 Jun 2009 We believe the downside and upside risks to equities are now quite symmetrical . The real lows have been seen, but a significant pullback from this current rally is quite possible.
10 May 2009 Green shoots may be appearing, but there are dry patches ahead.
03 Apr 2009 Given the coordinated global response to the global financial crisis and the fact that a lot of the economic data that is coming out is slightly less negative than expected we expect markets to continue higher for a short while longer.
04 Mar 2009 Friday’s sell off in the US triggered by their weaker than expected GDP data has resulted in the Dow Jones now having fallen over 50% from its highs. This could mean that we should be getting closer to a sustainable bottom
06 Feb 2009 At this point we are experiencing a small rally but there are many stumbling blocks in the weeks ahead including many of S&P companies reporting earnings and more importantly US economic data.
05 Jan 2009 Although things are looking better for 2009 it is no time to let our guard down. Most local consumers have significant debt burdens and retailers and commercial banks will most likely be affected most by this.
03 Dec 2008 Will there be a rally towards the end of the year in spite of the (official) US recession?
04 Nov 2008 We are well positioned for a rally although we don't think we have seen the last of the bear market.
02 Oct 2008 Barry Shamley believes that there is a reasonable chance of a bear market rally from current levels, but that it is prudent to limit equity exposure for the time being
04 Sep 2008 Key investment events during August were the improvement in US market sentiment and the drop in the oil and other commodity prices.
03 Aug 2008 Current rand strength has been attributed to SA's significant relative yield and speculation that local interest rates may have peaked, leading to the possibility of an economic recovery sooner than many offshore markets.
04 Jul 2008 Although there is a reasonable chance of a bounce in equity markets we have not yet seen full scale capitulation yet with the US VIX index which measures volatility not yet at its highs earlier this year.
03 Jun 2008 Bad debt due to non-payment of loans is expected to increase more than previously forecast. Some financial institutions and retailers could be facing losses as opposed to just declining earnings.
12 May 2008 The rally is getting narrower and fund managers are having a harder time spotting the winners.
04 Apr 2008 Economic outlook: The bottom line is that a slowdown in the US and Euro Zone effects everybody.
04 Mar 2008 The fundamentals do not paint a pretty picture and although there is a possibility that emerging markets do pull the global economy through this difficult period we will err on the side of caution and will reinvest only on pullbacks.
10 Feb 2008 We believe we are in the midst of a bear market squeeze/short cover rally. It is not possible to time this but we believe we are fairly close to the top. There is a reasonable chance of another downleg or sell off
07 Jan 2008 2008: Political uncertainty in SA and the rest of Africa seems to be increasing, which may dampen appetite for the continent. Investment risks have increased significantly, volatility will remain high and equity markets will not be for the faint hearted.
03 Dec 2007 Many markets have been quite close to key long term ‘Bull’ market support lines and we remain cautious in this regard.

06 Nov 2007 Consensus amongst market commentators is that the housing recession is set to run longer and deeper than everyone expected and probably only bottom in late 2008.

05 Oct 2007 Although equity markets have rebounded strongly the risk of a US recession still looms at the back of everyone minds but until it is confirmed by economic data investors are choosing to see the glass half full for the time being.

08 Sep 2007 August 2007, a historic month. The JSE all share index was 15% down from its July 2007 high at mid-month and bounced back dramatically to end up 0.35%.
03 Aug 2007 August Market View: Ongoing concerns in the credit markets, and corrections caused by a mass 'flight to safety'. We remain very defensive in the short term but still positive for equities on a long term view.
03 Jul 2007 Although July is off to a better start markets are likely to continue to be range bound and we will exercise caution until we are comfortable we are out of the danger zone.
04 Jun 2007 Mixed economic data interpreted positively for now
07 May 2007 Invested for now, but concerns over the increasing risks in China remain.
05 Apr 2007 Johannesburg Securites Exchange surprises many by reaching 27 267
06 Mar 2007 Message to investors: Exercise caution in these volatile markets.
06 Feb 2007 Markets rarely go up in a straight line, but the outlook based on fundamentals is encouraging

03 Jan 2007 Will an election year in the US affect SA markets? Other key issues include US inflation and the oil price...
06 Dec 2006 While we remain in our bull uptrend, many risks remain, which need to be carefully monitored.
06 Nov 2006 Equities flavour of the month but profit taking spree and lower US growth will be monitored closely.
04 Oct 2006 Increased offshore exposure and sector shift away from commodities
06 Sep 2006 August was characterized with many potential threats all of which failed to materialize.
01 Aug 2006 The vulnerable rand, reduced local consumption and consolidation of commodity prices leads us to a more cautious outlook
03 Jul 2006 While Equinox is ambivalent about global equity markets, the combination of a weaker rand and firm commodity prices seems to suggest that some sectors of the JSE may continue to do reasonably well.
08 Jun 2006 How serious is this correction? There is good technical evidence to suggest that the current correction could be deeper and longer than has been the case in the last three years.
08 May 2006 Controlled capital account deficit and continued high commodity prices key to South African equity performance
05 Apr 2006 The risk reward trade-off is becoming steadily less favourable.
06 Mar 2006 Correction or consolidation?
07 Feb 2006 Correction looming?
19 Jan 2006 Decreasing confidence in the US dollar and a growing perception that real underlying inflation in the US is higher than claimed seem to be fuelling the price of gold.
06 Dec 2005 Markets take a breather before moving higher
04 Nov 2005 SA economy in a relatively strong position
06 Oct 2005 September was another very strong month for South Africa and the majority of other world equity markets.
05 Sep 2005 The global equity markets continue to display a quite remarkable capacity to ignore bad news and, in fact, seems to use bad news as an excuse to surge ahead with new vigor.
05 Aug 2005 Ten good reasons why the JSE will continue to perform
05 Jul 2005 What are the possible consequences of increasing oil prices, a manic property market and Jacob Zuma fallout? Read here to find out...
03 Jun 2005 Risks receding but do not throw caution to the wind
06 May 2005 Mixed signals in the current market
05 Apr 2005 In the current complex and treacherous market it is possible that investors may panic, but there are still signs that our markets will strengthen.
05 Mar 2005 Markets trending higher, but we remain concerned about medium term implications of slowdown in US and China
04 Feb 2005 Cautious outlook in preparation for a weaker rand
21 Jan 2005 Markets Increasingly Nervous
18 Jan 2005 A Switch into Cash to Preserve Capital
03 Dec 2004 In the short term the momentum seems set to continue for most global equity markets, SA included - but it is fragile and a change in sentiment could result in a sharp correction.
05 Nov 2004 Current equity bull markets look set to persist – but for how long?
06 Oct 2004 Another great month for the JSE and globally, and SA's positives are many. We will remain fully invested ... but watchful.
03 Sep 2004 Industrial and financial shares seem set to move somewhat higher over the next several months. US could improve further to year-end. Take part in the rally - but with caution.
04 Aug 2004 Continued expectations that global equity markets will have an extended period of large rallies followed by large declines...use of hedging strategies may well become more critical
07 Jul 2004 Testing times these are...a good time to diversify out of rands, possible slight global rally ahead, select SA equities still offer value
01 Jun 2004 We continue to recommend a defensive approach to the markets, although good values still present in SA industrial and financial shares.
05 May 2004 Cautious on the outlook for world markets. We will remain in defensive portfolio positions.
12 Mar 2004 Caution required - should the SA all share index break its current uptrend, we will recommend some changes to our portfolios to make them more defensive.
06 Mar 2004 The world is enjoying strong economic growth and a general increase in asset prices - perhaps we should enjoy the party while it lasts..
15 Jan 2004 We will remain with our current portfolio selections for now - but will be very watchful for adverse developments.
01 Dec 2003 SA equity markets are likely to continue to offer reasonable investment opportunities in select shares but the overall market may well struggle to make headway.
11 Nov 2003 Since our last market view there have been a number of global developments that impact on our investment view going forward.
04 Sep 2003 Global bond yields affect intl equities. Bonds and property have peaked. SA equities favoured.
11 Jul 2003 Increase allocation to SA equities exposed to the domestic economy
21 May 2003 Remain cautious. Property unit trusts and South African shares which focus on the domestic economy remain the preferred investments.
07 Apr 2003 A short war? Maybe.... but it looks like a useful market rally anyway.
02 Apr 2003 SA equity markets continue to take their lead from offshore markets
17 Feb 2003 Remain cautious for now. Possible 'relief rally' ahead.
13 Dec 2002 Rand will remain strong. Property and Retail sectors look very good. Gold has possibilities. Global equities uncertain.
01 Nov 2002 Markets have been experiencing extreme volatility but seem to have reached a temporary bottom.
05 Sep 2002 Revisiting our medium term views - short-term movements in the global and local markets remain difficult to read and anticipate.
25 Jul 2002 A powerful rally on Wall Street after the carnage of the past few weeks. Where to now for global equity markets?
25 Jun 2002 Global equity markets are ripe for a short term rally. Bearish sentiment is over done for now. For speculative investors, we recommend taking an investment in funds exposed to the US equity markets.
31 May 2002 Given world uncertainties, some caution is called for. Continue to favour South African equities rather than offshore funds. Non-resource and non rand hedge shares remain attractive. Lock in profits on gold funds.
12 Apr 2002 Favour SA equities rather than offshore funds. Industrials and, possibly, small cap funds seem poised to out-perform.
18 Jan 2002 Volatility persists. Maintain equity positions for now. Avoid bonds and resources.
11 Oct 2001 While volatility will persist, this is a good time to be investing (cautiously) on a long term view
13 Sep 2001 Don't sell into the panic.
21 Aug 2001 Maintain Current Equity Exposure
23 May 2001 Continue Upweighting Equity Exposure
19 Apr 2001 Upweight Equity Exposure
15 Mar 2001 No Change in Recommendation
24 Nov 2000 No Significant Change in Recommendations For Now
11 Oct 2000 Recommendation change to cash : Global volatility catches up with SA
03 Oct 2000 Maintain Full Equity Weighting despite oil price and Euro volatility.
28 Aug 2000 Maintain upweight exposure: Global volatility has reduced and upside potential is seen.
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