domestic fixed interest positioning and investment outlook - efficient group...
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DOMESTIC FIXED INTEREST
POSITIONING AND INVESTMENT
OUTLOOK
Henk Viljoen
SA Key Stepping Stones
2
South Africa Real GDP Growth Year-on-Year
-3,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
05 06 07 08 09 10 11 12 13 14 15 16
%y/y
3
South Africa Corporate Deposits
250270290310330350370390410430450470490510530550570590610630650670690710730750770
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6R billion
4
5
Net Foreign Buying of Local Bond (ZAR bn)
-30
-20
-10
0
10
20
30
40
May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17
6
Foreign Flows Impact on CDS spread
180
190
200
210
220
230
240
250
(10 000)
-
10 000
20 000
30 000
40 000
50 000
Foreign Flows CDS Spread
7
Yield Curve – How far can it go?
8
Evolution of the yield curve
53
32
698
12
18
62
0
10
20
30
40
50
60
70
Bond 0 - 3 Years Bonds 3 - 7 Years Bonds 7 - 12 Years Bonds Over 12 Years
ALBI 2005 ALBI 2017
9
0%
20%
40%
60%
80%
100%
ALBI SA BondUniverse
Bond Fund
94%
65%55%
6%
13%
20%
0%
22% 25%
Government Parastatals Other Credit
bps
0
70
140
210
280
Jan-03 Nov-05 Sep-08 Aug-11 Jun-14 Apr-17
bps
AAA AA A
Portfolio Construction (An uneven universe)
Holdings of Local Bonds
10
9% 10% 13% 14%22%
29%36% 36% 36%
32% 36% 37%14%
16%18% 18%
18%
17%
17% 15% 15%18%
18% 17%
10%
13%14% 12%
14%12%
14%9% 9% 8%
7% 8%45%
46%44%
40%
36% 33%
25%
29% 29% 31% 28% 27%
23%14% 12%
16%10% 10% 8% 11% 11% 11% 11% 11%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
% of total Foreign Banks Insurers Pension funds Other
Yield Decomposition – Fair Value Calculation (bps)
9.00%
223 199 186232 250
201 257 281 210250
381399
432425
400
0
100
200
300
400
500
600
700
800
900
1000
Average since 2011 Average since 2015 2016 average Latest Stanlib Forecast
Risk free rate Credit risk premium Implied inflation/currency risk premium
Source: Standard Bank, Stanlib, Bloomberg24
Income Fund Real Returns (Yearly)
12
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
Income Fund Real Return (Yearly)
THANK YOU
14
-6 -14 -16
-24 -34
-45 -48 -45 -41
-100
-50
-
50
100
150
200
6,0
7,0
8,0
Jun '17 Jul '17 Aug '17 Sep '17 Nov '17 Feb '18 May '18 Aug '18 Nov '18
Market Change Market View STANLIB View
Rates Forecast
Collective Investment Schemes (CIS) in Securities are generally medium to long-term investments. An investment in the participations of
a collective investment scheme in securities is not the same as a deposit with a banking institution. The value of participatory interests
may go down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage
in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from STANLIB
Collective Investments (“the Manager”). Commission and incentives may be paid and if so, would be included in the overall costs.
Forward pricing is used. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go
up or down. Liberty is a full member of the Association for Savings & Investment SA (ASISA). The Manager is a member of the Liberty
group of companies.
The information and content of this document are intended to be for information purposes only and STANLIB does not guarantee the
suitability or potential value of any information contained herein. STANLIB Wealth Management Limited does not expressly or by
implication propose that the products or services offered in this document are appropriate to the particular investment objectives or needs
of any existing or prospective client. Potential investors are advised to seek independent advice from an authorised financial adviser in
this regard. STANLIB Wealth Management Limited is an authorised Financial Services Provider in terms of the Financial Advisory and
Intermediary Services Act 37 of 2002 (Licence No. 26/10/590)
Disclaimer
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