THE MARKETS AT A GLANCE

FTSE/JSE All Share Index (Alsi): –0.22 percent with dividends reinvested SA Bond Index: –2.27 percent FTSE/JSE Listed Property Index: –0.35 percent MSCI World Index: 7.29 percent in rands and –0.07 percent in United States dollars. The rand fell 6.4 percent against the US dollar and 8.1 percent against the euro. Alsi: 21.01 percent with dividends reinvested SA Bond Index: 6.26 percent FTSE/JSE Listed Property Index: 24.02 percent MSCI World Index: 37.22 percent in rands and 16.01 percent in US dollars. The rand fell 15.46 percent against the US dollar and 19.25 percent against the euro. Alsi: 18.11 percent a year with dividends reinvested SA Bond Index: 10.66 percent a year FTSE/JSE Listed Property Index: 23.58 percent MSCI World Index: 21.25 percent a year in rands and 11.24 percent in US dollars. The rand fell 22.78 percent (8.26 percent a year) against the US dollar and 27.79 percent (10.28 percent a year) against the euro. developing countries, where interest rates on bonds will also rise to compete for the pool of global savings.

Currencies that benefited when investors came to their markets in search of higher yields will come under pressure once the flow of investments into their markets stops or reverses, De Kock says. In anticipation of these changes, the rand has weakened materially and local bond yields have moved higher and are likely to go higher still, he says.

Although it is clear that returns from bonds will be poor, it is uncertain what this will mean for equities, De Kock says.

Coronation believes the Federal Reserve will be very careful about reducing its stimulus of the US economy and will do so only if the economy is healthy enough, he says.

As the global economy continues to recover, Coronation thinks it will be unwise to reduce exposure to equities too early, De Kock says.

Investec’s flagship multi- asset fund, the Opportunity Fund, remains exposed to offshore markets at close to the maximum of 25 percent of the fund.

LESS OPTIMISTIC

Sumesh Chetty, a portfolio manager in the Opportunity Fund team, says although most economic indicators are pointing to further strength in the US economy, Investec is slightly less optimistic about global prospects than most investors because it is of the view that increases in bond yields will result in further pressure on consumers in the form of higher mortgage bond repayments.

Nevertheless, the strengthening recovery should give investors more appetite for US equities and bring a stronger US dollar with it, he says.

The Opportunity Fund’s management team has struggled to find attractively priced opportunities locally but has been able to find them offshore, where risk is lower, cash flows are superior and valuations are better, Chetty says.

Paul Hansen, director of retail investment marketing at Stanlib, says Stanlib was expecting global equity returns of 15 percent in rands for this calendar year, but global equities had already returned 32.6 percent in rands by the middle of this month.

Global equities have had a strong run since July last year and are up more than 50 percent since then in rands, despite a period of consolidation over the past few months, Hansen says.

Stanlib is of the view that global equities will continue their upward trend, but much of the return may already have been earned, he says.

Stanlib remains overweight in offshore equities, preferring them to local equities, he says.

Global property has come back strongly and has reached an attractive level after a sharp correction, Hansen says.

PSG Asset Management is also keeping its investments in offshore markets at the maximum levels, despite the fact that these markets have already had a strong run.

Shaun le Roux, portfolio manager at PSG, says that PSG is a bottom- up manager – it chooses shares based on its research into whether they represent good businesses in which to invest and not on trends in the economy.

PSG is still finding good opportunities to invest in excellent companies offshore that will produce better returns than quality companies listed on the JSE, he says.

PSG’s offshore allocations are mainly to stocks in the US, but the manager is also invested in some attractively priced European companies, Le Roux says.