In our July article entitled \u201cEquity Market Direction \u2013 Will it be the \u2018P\u2019 or the \u2018E\u2019?\u201d we wrote about the well-known fact that corporate earnings (E) are a very influential driver of share prices (P) over the long-term.<\/p>\n
To quote US-based investment advisory firm, Fisher Investments: \u201cWith two companies now reporting positive advanced trial results for a Covid vaccine \u2013 with big share price booms accompanying their announcements \u2013 investors\u2019 interest in vaccine candidates is at fever pitch. The thesis: If you can just pick the winner(s) in the vaccine race, quick riches will follow. Appealing, but in our view, wrong. This heat-chasing ignores markets\u2019 efficiency and fundamental considerations, and we think investors are best off not speculating in this arena (or at all).\u201d<\/p>\n
Fisher further points out that vaccines generally are not huge money-makers for pharmaceuticals firms. They cost a lot to develop, sell for little, and are a one-time purchase for each customer. The entire world may seek inoculation, but after society has gained immunity, demand will dry up.<\/p>\n
Markets are forward-looking, and with specific reference to these pharmaceutical companies, it is the extent to which the \u2018E\u2019 will materialise that will determine the \u2018P\u2019 over the medium-term.<\/p>\n
Dynasty has an investment bias where our selected Funds comprise quality holdings with a strong element of earnings certainty, in preference to chasing thematic-based earnings dreams!<\/p>\n
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Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.\u201d\u00a0<\/em> <\/p>\n The local investment industry has been put into a spin following Exchange Circular No. 15\/2020 (published on 29 October 2020 by SARB), allowing inward listed debt and derivative instruments, as well as exchange-traded funds referencing offshore assets, to be classified as domestic, provided they meet all the criteria and are approved by SARB and the exchange after going through an approval process.<\/p>\n This would have far-reaching implications for local investment vehicles in that approved retirement funds would no longer be subject to the 30% limit in terms of offshore exposure<\/strong> and that they could effectively be fully rand-hedged by investing in locally listed exchange-traded funds (ETF\u2019s) which track offshore indices.<\/p>\n A few\u00a0asset managers and investment advisory firms have been quick to\u00a0publicise\u00a0this opportunity to \u201cdollarise\u201d clients\u2019\u00a0assets, but Dynasty\u2019s\u00a0retirement fund\u00a0providers such as Ninety One (formerly Investec Asset Management), are being forced to follow a more cautious approach as the\u00a0Financial Services Conduct Authority (FSCA)\u00a0have\u00a0now stepped in:<\/p>\n The FSCA was not aware that the Circular was going to be published and have indicated that they need time to evaluate the impact and determine the correct Financial Sector application.<\/p>\n The lack of wider\u00a0industry consultation has meant that there are a number of issues that need to be clarified by various industry participants before the opportunity can be properly assessed. This includes how these assets will be treated from CISCA (the Collective Investment Schemes Control Act); from a Regulation 28 perspective; and the level of look-through required.<\/p>\n A subsequent\u00a0FSCA communication – communication 53 – makes it clear that\u00a0current regulations remain in force<\/strong>. This means that offshore exposure (ex-Africa), both direct and indirect, is limited to 30% within retirement funds until such time that further clarification has been provided.<\/p>\n The communication also warns the investment industry<\/strong>\u00a0not to make assumptions in relation to their own governing legislation and to await clarification from the FSCA.\u00a0 The SARB Exchange Control Circular was issued to regulate exchange control and not to determine Financial Sector legislation, following the Finance Minister\u2019s and National Treasury’s aim to permit increased flows into the country.<\/p>\n As Dynasty, we are very excited about the opportunity to be more flexible in terms of our offshore allocation within clients\u2019 retirement funds, and are eagerly awaiting further regulatory clarification\u00a0on this matter.<\/p>\n","protected":false},"excerpt":{"rendered":" In our July article entitled \u201cEquity Market Direction \u2013 Will it be the \u2018P\u2019 or the \u2018E\u2019?\u201d we wrote about the well-known fact that corporate earnings (E) are a very influential driver of share prices (P) over the long-term. To quote US-based investment advisory firm, Fisher Investments: \u201cWith two companies now reporting positive advanced trial…<\/p>\n","protected":false},"author":14,"featured_media":65233,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-65232","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-newsflash","category-3","description-off"],"_links":{"self":[{"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/posts\/65232","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/users\/14"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/comments?post=65232"}],"version-history":[{"count":0,"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/posts\/65232\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/media\/65233"}],"wp:attachment":[{"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/media?parent=65232"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/categories?post=65232"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dynasty.co.za\/staging\/wp-json\/wp\/v2\/tags?post=65232"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n\u2013 Fred Schwed Jr, an American stockbroker turned author<\/p>\nGlobal News<\/h2>\n
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Local News<\/h2>\n
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SARB Announcement on Inward Listed Instruments puts Industry in a Spin<\/strong><\/h2>\n