Multi-Manager Market Commentary - Q3 2021 - Sanlam ...
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Multi-Manager Market Commentary
Q3 2021Contents Contents .................................................................................................................................................. 1 Executive Summary ................................................................................................................................ 2 Highlights................................................................................................................................................. 2 Global Equities ........................................................................................................................................ 2 Global Bonds and Listed Property .......................................................................................................... 4 SA Equities ............................................................................................................................................ . 5 SA Bonds and Listed Property ................................................................................................................ 6 SA Cash .................................................................................................................................................. 7 Asset Allocation ....................................................................................................................................... 8 Appendix A: Market Performances ......................................................................................................... 9 Disclaimer.............................................................................................................................................. 11 1
Executive summary Risk assets disappointed in the third quarter of the year as a lethal cocktail of surging energy costs, ongoing supply chain disruptions and a possible US debt default weighed on investor sentiment. With bond yields rising in tandem with rising inflation expectations, bonds also yielded negative returns with only global inflation-linked bonds yielding positive returns within the broad offshore asset classes. The upshot of the energy crunch and supply chain disruptions is that consumption expenditure and industrial output will slow, raising concerns about growth and the forward earnings outlook for equity markets. Since the surge in energy prices is likely to be short-lived, 2022 is expected to see a large inventory rebuild as companies restock and consumers draw down on their excess savings built up over the pandemic period to spend on goods. Supply chain constraints are expected to ease with semi-conductor backlogs filled, aiding a recovery in the global automotive sector, amongst others. Fixed investment expenditure is also expected to increase, highlighted by the current divergence between capital goods orders and shipments, as port congestions and logistical bottlenecks ease. These growth drivers are expected to offset the contractionary effects of decreases in fiscal outlays expected over the coming year. While monetary policy normalisation in the US is expected to result in an equity market derating, there is still sufficient earnings growth momentum in markets to support an overweight position in risk assets. On the domestic front, equities were hardest hit by a sharp sell-off in technology and resource stocks amid China’s regulatory crackdown and slowing economic growth, while bonds squeezed out positive returns despite higher nominal and real bond yields. Given attractive equity market valuations and high real yields on South African bonds, overweight positions are retained in both of these asset classes. Even though cash is expected to yield average real returns of some 0% over the coming year, the underweight position is retained given higher return expectations from competing asset classes. Highlights • Europe and China’s energy crisis a headwind for growth, inflation and supply chains • US FOMC announces asset purchase tapering by year-end. Median dot-plot points to rate hikes in 2023 • US Congress still at odds over debt ceiling; no agreement yet on Biden’s social spending plan • BOE signals rate hike by year-end on inflation risks • China Evergrande Group triggers bond default risks and surge in high-yield spreads • SARB leaves repo rate unchanged in unanimous decision; Fra’s rise • US, UK and EU envoys discuss green financing for Eskom • November MTBPS a test for SA’s new Minister of Finance Global Equities Global equity market returns were volatile over the third quarter as an energy cost squeeze in Europe and China, ongoing global supply chain disruptions, the US Congress’ failure to raise the debt ceiling and expectations of asset purchase tapering all weighed on investor sentiment. The regulatory crackdown in China coupled with a slowdown in the country’s fiscal impulse, weighed on commodities as the growth outlook deteriorated. Indications from the BOE that it stood ready to raise rates before the end of the year, even before QE had been unwound, was a further headwind for risk assets. With inflation risks now elevated at the producer and consumer price level, bond yields have been steadily rising since the beginning of the year. US 10-year treasury 2
yields have risen from 0.92% at the beginning of the year to 1.49% as at quarter end. Since elevated energy costs will filter through into reduced consumer spending and lower industrial consumption, it is no surprise that growth estimates are being revised lower, with investors fretting about the forward earnings outlook. While value stocks have outperformed growth stocks over the year-to-date period as bond yields have pushed higher, static yields in the third quarter helped growth stocks to outperform their value counterparts. Within emerging markets, however, this was not the case as technology stocks sold off heavily following the Chinese government’s regulatory crackdown on big-tech companies. The MSCI World Index was flat for the quarter, down 0.01% in US dollars but up 5.4% in rands due to rand depreciation. Emerging market equities, in turn, bore the brunt of lower industrial commodity prices, the funding squeeze at China Evergrande Group and the effects of the regulatory crackdown, declining by 8% in dollars and 3.1% in rands. The Chinese energy crunch has been fueled by a surge in coal prices, given that about two-thirds of Chinese electricity production is sourced from coal. With state-owned power generators caught between the regulated prices at which they are permitted to sell power and the market-determined cost of their fuel, profits at generators have fallen by around 70% from a year earlier, in the first half of the year. Although generators depend on implicit guarantees from the government that they will be bailed out in the event of stress, this has not been the case thus far as the government has not released reserves from its own stockpiles. With reserves at a quarter of what they were a year ago, generators have been left with no option but to shut down rather than sell power at deep losses. The ban on the importation of Australian coal in 2020 and tough emissions targets ahead of the Beijing winter Olympics, have been a further cause of the spike in prices. The upshot of the current energy crisis is that supply chains could be further disrupted across countries and provinces that rely on imported raw materials from China. But, there could be light at the end of the tunnel. After months of being ordered to stick closely to capacity limits, miners are now being ordered to produce as much as they can, which could take the wind out of thermal coal prices and prevent the crisis from extending through the winter. In Europe’s case, the surge in gas prices has spilled over into oil and coal prices, as countries look for alternative sources of energy. European gas prices have more than tripled this year, while power prices have almost doubled, highlighting the predicament that individual consumers and industrial consumers face. Planned outages of nuclear reactors, delayed maintenance at gas production facilities and lower availability from wind power all combined to create gas shortages in Europe, which have not yet been replenished ahead of the coming winter. The risk is that Europe could face blackouts this winter given that storage site inventories are at their lowest levels in more than a decade for this time of the year. How long the energy crunch will persist depends on whether Russia will increase supply to the EU and whether Germany will expedite regulatory approval of the Nord Stream 2 pipeline that the US is opposed to. President Putin has indicated his willingness to raise output to at least stabilize gas prices in the region. But since Gazprom’s Nord Stream 2 pipeline will only be running at about 10% capacity in the remaining months of the year, buy-in will be required from Ukraine and Poland to use their pipelines to supply the EU. Since the surge in energy prices is likely to be short-lived, 2022 is expected to see a large inventory rebuild as companies restock, while consumers will draw down on their excess savings built up over the pandemic period to spend on goods. Supply chain constraints are expected to ease with semi-conductor backlogs filled, aiding a recovery in the global auto sector. Currently, semi-conductor lead times are at 21.7 weeks, the ninth month of gains. Fixed investment expenditure is also expected to increase given the current disparity between capital goods orders and shipments. These growth drivers are expected to offset the contractionary effect of the decrease in fiscal outlays expected from next year onwards. The uncertainty about the US debt ceiling was partially removed after quarter-end with the US Congress agreeing to raise the debt ceiling by some $480bn until December. Thereafter, negotiations will resume, once again bringing uncertainty about a potential US debt default into focus. A further cause of investor uncertainty has been the Fed’s stated intention of tapering its asset purchase program before the end of the year, helping to push bond yields higher, even though asset purchase tapering and policy rate hikes are viewed as two separate issues by the Fed. While tapering is expected to be completed by the middle of 2022, the Fed’s 3
median dot-plot shows that FOMC members expect the first policy rate hike to come into effect in 2023, with a cumulative 75 basis points of increases expected in that year. In 2024, a further 75 basis points of increases is expected, bringing the fed funds rate to 1.75%. But, monetary accommodation is expected to remain in place in the EU and Japan, even as the ECB plots its exit from the Euro 1.85 trillion Pandemic Emergency Purchase Program (PEPP) by March 2022. The ECB may introduce a new bond buying program to complement its existing QE program that came into effect in 2015. The intention behind the new program is to ensure sufficient policy tools to prevent periphery country bond spreads from widening as the PEPP is withdrawn. While monetary policy normalisation in the US is expected to result in an equity market derating, there is still sufficient earnings growth momentum in markets to offset a market derating. If the MSCI World Index derates from its current 23.4X earnings to 21X (long-term mean), a return of 10% is possible given consensus bottom- up earnings growth estimates of 20.5% in the year ahead. Alternatively, if 10-year US Tips were to increase by 50 basis points, the S&P500 is unlikely to derate meaningfully given that some derating has already been priced into the index. Furthermore, an analysis of changes in 10-year bonds yields relative to equity market returns suggests that US 10-year bond yields would need to increase meaningfully from current levels in order for equity markets to yield negative returns. Since bond yields are unlikely to push substantially higher over the coming year, equities still appear to be the asset class of choice given the duration risks embedded in bonds. However, since inflation risks are becoming more broad-based, and earnings growth expected to slow to single digits two years out, the aggressive overweight to global equities is moderated to a smaller overweight position on a six to twelve-month view. In the case of emerging market equities, a small overweight position is retained in spite of China’s high weighting in the MSCI Emerging Market Index. The sell-off that has accompanied Chinese equities in recent months does offer a buying opportunity for investors, particularly in some of the big-tech names. While there is a risk that China Evergrande Group debt defaults could spill over into the broader property sector with more names defaulting, this is not regarded as China’s Lehman’s moment. With vaccine rollouts also expected to gain traction across emerging market economies over the coming year, the re-opening trade coupled with an acceleration in economic growth will offer investors good returns over the coming years. Global Bonds and Listed Property Global bond yields rose over the quarter, as inflation risks intensified amid spikes in energy, gas, coal and oil prices. Expectations that the US Fed would start tapering its asset purchase programme was a further contributor to the upward pressure on yields. While pandemic related price increases in used car and truck prices, car rentals and accommodation costs will prove to be transitory, the spike in energy costs could prove to be more persistent, at least over the northern hemisphere winter. Wage cost pressures from the on-shoring of global supply chains and the holding of higher inventory levels could also extend well into 2022, with surging house price increases and ongoing supply chain disruptions further headwinds over the coming year. Against this backdrop, the Barclays Capital Global Aggregate Bond Index declined by 0.9% in US dollars but rose 4.4% in rands, underperforming global equities. The yield on the index increased from 1.13% to 1.17%, accounting for the negative returns. Despite a 3.5% depreciation in emerging market currencies and an increase in spreads from 269 basis points to 302 basis points, emerging market bonds yielded -0.6% in US dollars given their relatively attractive yields. 10-year yields on Brazilian bonds rose to 11.09%, Mexican bonds to 7.38%, Russian bonds to 7.31% and Turkish bonds to 17.92%, highlighting the broad based nature of the rise in yields. As a result of the upside risks to inflation, global inflation-linked bond yields moved deeper into negative territory, declining from -1.51% to -1.56%, accounting for the 0.6% US dollar-return on the Barclays Capital Global Inflation Linked Bond Index. US inflation-linked bond yields were mostly unchanged at -0.85% over the quarter, but over the past month real yields increased with break-even inflation pushing marginally higher. 10-year break-even inflation increased to 2.38% from 2.34%, whereas five-year break-even inflation increased to 2.6% from 2.55%, reflecting the bond market’s view that inflation will remain above the 2% target of most developed 4
market central banks over the coming years. While central banks have stressed that inflation would be transitory, they have nonetheless given themselves breathing room by changing their inflation targeting regime to an average inflation target over a number of years. But, the University of Michigan’s Inflation Expectations Index is more bearish with the five to ten-year measure of expected inflation higher at 3%. This points to the likelihood of an earlier move to raise interest rates, notably by the US Fed and the BOE, which can explain the rise in real treasury inflation protected security yields over the past month. Given the upside risks to inflation and the high duration risk on bonds, an underweight position is still retained in both nominal and inflation-linked bonds. The increase in inflation risks over the past month saw the EPRA/NAREIT Developed Markets Property Index give up 5.7% in US dollars as investors worried about the impact of surging energy costs on consumer spending and the prospects for lower rental growth. For the quarter, listed property yielded a -0.8% USD-return, with the price-to-book ratio holding steady at some 1.52X. But the sector had rerated sharply earlier in the quarter as Covid-19 lockdown restrictions were eased across a number of countries as vaccination rates accelerated. However, since the price-to-book ratio is still ahead of the 1.46X mean, the sector has been downweighted to underweight from neutral. SA Equities South African equities underperformed developed market equities in the third quarter but outperformed the emerging market composite benchmark, yielding some -0.8% in rands and -5.9% in US dollars. The Capped Swix Index performed somewhat better, yielding 3.2% in rands given the lower exposure to resource and technology shares. Technology counters lost 19.2% due to China’s regulatory crackdown on technology heavyweight companies, whereas resource shares lost 3.6% on the surge in energy prices and a lower growth outlook, particularly for China. The weaker rand failed to offset the sharp decline in US dollar-metals prices and in platinum group metals. US dollar-metals prices were down 29.2% for the quarter, while platinum was down 9.1%, palladium 29.8% and rhodium 29.5%. This in all likelihood reflects production constraints within the automotive sector linked to the shortage of critical semi-conductors. Within the resources subsector, precious metals counters were down 17.6% and industrial metals counters some 7.3%. Unsurprisingly, value stocks (5.4%) outperformed growth stocks (-6.9%) given the still relatively high weighting of Naspers and Prosus in the index. On the positive side, healthcare stocks rose some 33.9%, led by a 67.1% surge in Aspen’s share price. The gains followed Aspen’s announcement of a deal with Johnson and Johnson to produce their Covid-19 vaccine for South Africa and Africa. In general, SA Inc. shares recorded gains following Stats SA’s rebasing and re- benchmarking exercise that showed the economy 11% bigger than initially thought in 2020, with household consumption expenditure revised 16% higher. Better-than-expected GDP prints for both the first and the second quarters also resulted in upward revisions to consensus growth estimates for the current year, further underpinning SA Inc. counters. Following the September MPC meeting, the SARB also revised its growth estimate for 2021 higher to 5.3% from 4.2%, whereas for 2022 and 2023, growth was revised lower from 2.3% and 2.4% to 1.7% and 1.8% respectively. The SARB’s benign forecasts in the outer years suggest that the country’s much needed structural reforms will not be forthcoming any time soon. Support for the SARB’s upward revision can however be seen in the latest Absa purchasing managers index that rebounded sharply after the July unrest. The new orders-to- inventories sub-components support this view, pointing to an acceleration in manufacturing activity as inventories are rebuilt, not just from the July unrest but also from the Covid-related lockdowns. 5
Despite the subdued economic growth outlook for 2022 and 2023, bottom-up consensus earnings estimates are still supportive of equities, especially since the market is attractively priced when valued on a forward price- to-earnings basis. Since the All Share Index is trading on a trailing price-to-earnings ratio of 11.4X, well below the 15.8X mean and one-standard deviation below the mean, earnings growth is expected to drive returns in the year ahead. The market’s forward price-to-earnings ratio of 9.9X also supports this view, not too dissimilar from the MSCI SA forward multiple of 9.2X earnings. Bottom-up consensus earnings estimates of some 13% over the coming year point to a possible market return in excess of 20%, even if a small rerating to 12X earnings is priced into estimates. While earnings growth is expected to slow markedly to around 1.5% two years out, it is the resources sector that is expected to record negative earnings growth of almost -20%. This leaves financials and industrials as the drivers of earnings in year two, with the Fini-15 and Indi-25 expected to deliver earnings growth of 15% and 18% respectively. This does not necessarily mean that resource shares are an obvious sell since the Resi-10 trades on a forward P/E of some 6.5X earnings, also cheap relative to history. For these reasons, the overweight to domestic equities is retained, at least over the coming year, despite market expectations of a 200 basis point rise in the repo rate. SA Bonds and Listed Property South African bonds fell foul of investors’ flight-to-safety in the third quarter of the year amid a stronger dollar and heightened risk aversion. Foreigners were net sellers of South African bonds, totalling a whopping R68.1bn, highlighting the capital flight from emerging markets. Inflation also pushed higher to 4.9% from 4.6% the month before, largely due to higher transport costs (petrol). Food inflation was also higher and is now at its highest level in four years. Since food and transport inflation are likely to remain elevated for the next few months, headline inflation is likely to hover around current levels before moving back to the middle of the inflation target range next year, aided also by base effects. Due to the increase in risk aversion and investors’ flight-to-safety, the yield on the All Bond Index increased from 9.66% to 9.99%, accounting for the lacklustre 0.4% rand return (-4.7% in US dollars). Inflation-linked bonds benefitted from the inflation carry to yield some 1.9% for the quarter, even as real yields on the inflation-linked bond index ticked higher from 3.88% to 3.91%. At current yields (on the Albi), nominal bonds offer real returns in excess of 5%, consistent with our fair value assumption. With inflation likely to average around 4.5% over the coming few years, an overweight position is retained in nominal bonds. With respect to inflation-linkers, a neutral weighting is retained since real yields are aligned with our 4% fair value assumption. However, since break-even inflation of some 6.0% exceeds our average inflation estimate of 4.5%, the yield pick-up from nominal bonds over inflation-linkers, even after adjusting for the inflation risk premium, is still in excess of 1%. But bond market risks abound ahead of the November Medium Term Budget Policy Statement, given growing calls on the new Minister of Finance, Enoch Godongwana, to implement a basic income grant, a proposal supported by the World Bank given SA’s high unemployment rate. Funding for some form of National Health Insurance (NHI) could also be on the cards given repeated calls by the government and the President to implement such a programme. While the favourable terms of trade have underpinned tax revenues in the current fiscal year and have buoyed incomes, Treasury will not be able to rely on a similar windfall in the 2022/23 fiscal year, given expectations of a slowdown in global growth and a reversal in the current account surplus. Even if the windfall were to persist, revenue would fall well short of the costs needed to fund the basic income grant and NHI. In addition, the unbundling of Eskom into three separate entities will have cost implications, with the transmission business on track to be unbundled by the end of this year and the distribution and generation businesses by the end of 2022. But these entities will require funding in order to transition away from fossil fuels, which Meridian Economics estimates at R450bn over the next decade in order to build 6000MW of renewable projects annually, while another R200bn will need to be spent on transmission lines and distribution grids. With half of Eskom’s debt likely to be apportioned to the generation business and the remaining debt split 6
between the transmission and distribution businesses, Eskom will not be able to finance the capital expenditure required. In fact, it has repeatedly asked for a debt write-off of some R200bn. Meridian, a Cape Town based consultancy, envisages concessional and discounted financing to help reduce Eskom’s debt burden and interest costs. While the proposal envisages a green funding facility of US$16bn (R240bn) over five years at a concessional interest rate of 1.5%, the size of Eskom’s debt is unlikely to reduce. The concessional funding would, however, reduce the interest bill and could allow for the refinancing of existing debt, although funders are unlikely to want to fund coal assets. At the end of the day, Treasury would need to take the debt on board. Given Stats SA’s R548bn upward revision to SA’s gross domestic product, there may be a window of opportunity to take on some of Eskom’s debt without fast-tracking further ratings downgrades. With climate envoys keen to use South Africa as a poster child for the upcoming COP26 climate talks in November, the opportunity to access green funding is now. Since the country’s estimated debt-to-GDP ratio for the 2021/22 fiscal year has likely fallen to around 73% of GDP, down from around 81% of GDP at the time of the February budget, this could be a possible solution to the country’s low-growth trajectory. Domestic listed property yielded some 5.9% in rands in the third quarter even as the sector derated in the risk- off environment. The property-to-bond yield ratio increased from 0.53X to 0.63X as 10-year bond yields rose, but still fell well short of the 0.9X mean. Rather, it was the 28.6% surge in dividends per share that propped up returns over the quarter. As a consequence, the dividend yield jumped up to 6.1% from 4.7% the previous quarter, still short of the targeted 8.7% yield. Due to the stellar returns from listed property over the past year (54.4%) – albeit off a low base – the sector is still expensive relative to bonds, with return expectations also less compelling relative to other asset classes. As a consequence, a small underweight position is retained in listed property. SA Cash SA cash yielded 0.95% in rands and -4.2% in US dollars in the third quarter, outperforming domestic equities and nominal bonds. Following the September Monetary Policy Committee (MPC) meeting, the committee left its inflation forecasts largely unchanged with only the 2021 estimate being revised marginally higher to 4.4% from 4.3% at the July meeting. For 2022 and 2023, CPI estimates were left unchanged at 4.2% and 4.5% respectively. Core inflation was also revised marginally higher to 3.0% from 2.9%, and in 2022 to 3.8% from 3.7% previously. The estimate for 2023 was left unchanged at 4.3%. In spite of the stable outlook for inflation, the MPC warned that the risks to the short-term inflation outlook were assessed to the upside. Rapid global producer price and food price inflation have surprised to the upside in recent months and could continue to do so over the coming quarters. Oil prices could also rise beyond the MPC’s expectations because of the global energy crunch and Opec+’s decision to limit production increases, while electricity and other administered prices also continue to present short-term risks. The SARB’s assumptions of a weaker currency due to a declining terms of trade, higher domestic import tariffs, and escalating wage demands over the medium to longer term, present further upside risks to the inflation forecast. In an acknowledgement of these risks and a smaller output gap following Stats SA’s upward revision to gross domestic product, the implied path of interest rates as reflected in the Bank’s Quarterly Projection Model (QPM), increased to 5.17% (4.93%) as at the end of 2022 and to 6.36% (6.13%) by the end of 2023. The money market, in turn, is pricing in slightly more aggressive interest rate increases of 2% by the end of 2022 and a further 100 basis points by September 2023. This brings the repo rate to 6.5% in Q3 2023, somewhat higher than the QPM’s implied rate of 6.36% by year-end. Since cash is likely to yield an average real return of some 0% 12-months out, an underweight position is retained in cash given higher real return expectations from competing asset classes. 7
Asset Allocation
Our asset allocation view is summarized in the table below:
• Overweight SA equities on attractive forward earnings yield, large relative valuation discounts and real
return expectations
• Overweight SA bonds on real yields and expected yield curve bear flattening
• Neutral SA inflation-linkers on inflation carry and high duration risk
• Underweight SA listed property on relative return expectations
• Underweight SA cash on 12-month 0% real return estimate
• Neutral offshore weighting on favourable SA terms of trade, current account surplus and aggressive
rate hikes priced into money market forward rate agreements
• Overweight developed market equities on equity risk premium, fairly-valued forward price-to-earnings
multiples and 12-month return expectations. Moderate overweight on a 6 to 12-month view on single
digit earnings growth estimates 2-years out
• Overweight emerging market equities on accelerated vaccine rollout programs and relative growth
outperformance in 2022. Moderate overweight on a 6 to 12-month view on single digit earnings growth
estimates 2-years out
• Underweight global bonds on rising inflation risks, asset purchase tapering and possible policy rate
hikes
• Neutral emerging market bonds on high absolute yields and expected yield curve bear flattening
• Underweight global inflation-linkers on negative real yields and high duration risks
• Underweight global listed property on stretched price-to-book valuations and low dividend yields
• Underweight USD cash on Fed’s median dot-plot policy rate hike expectations
Asset Allocation Positioning 10 Year Forecast 1Y
-2 -1 0 1 2 2018 2019 2020 092021
SA Equities ∆ 11.5% 12.5% 12.5% 21.3%
SA Bonds ∆ 8.5% 9.0% 10.0% 13.2%
SA ILB ∆ 8.0% 8.5% 9.0% 10.8%
SA Property ∆ 10.5% 12.0% 13.0% 8.6%
SA Cash ∆ 7.0% 7.0% 6.0% 4.3%
DM Equity ∆ 11.0% 11.0% 10.5% 14.1%
EM Equity ∆ 12.0% 12.5% 12.5% 17.7%
Global Bonds ∆ 6.5% 6.5% 6.5% 1.1%
Global ILB ∆ 6.8% 6.5% 6.0% 0.9%
Global Property ∆ 10.0% 9.0% 10.0% 4.6%
Global Cash ∆ 6.8% 6.0% 5.3% 1.6%
International ∆
Inflation Assumption 5.50% 5.50% 5.00% 4.40%
Legend Current Positioning 0 = Neutral
0-3 Month View +/-1 = 1% to 2% over/underweight
∆ 6-12 Month View +/-2 = 2% to 4% over/underweight
8Appendix A: Market Performances Periods up to 30 September 2021 1 month 3 months 6 months YTD 1 year 3 years 5 Years 10 Year ALL SHARE (ZAR) -3.14% -0.84% -0.79% 12.25% 23.19% 8.58% 7.83% 11.50% ALL SHARE ($) -6.87% -5.89% -2.63% 9.59% 36.58% 6.38% 5.87% 4.72% ALL SHARE (GBP) -4.94% -3.58% -0.37% 11.10% 30.95% 5.21% 5.11% 6.24% TOP 40 -3.56% -1.60% -2.42% 10.45% 20.25% 8.96% 8.37% 11.57% MID CAP 0.52% 7.16% 13.51% 24.13% 41.12% 8.05% 3.76% 10.22% SMALL CAP 5.58% 11.72% 20.67% 46.28% 78.32% 9.03% 4.35% 11.60% FLEDG 4.96% 11.23% 24.52% 48.57% 89.03% 9.84% 5.75% 9.88% DERIVATIVE RES 20 -9.55% -3.83% -8.78% 8.32% 16.83% 16.03% 17.47% 6.05% IND 25 -1.17% -5.31% -5.22% 6.54% 13.79% 7.96% 5.65% 14.37% FIN 15 1.66% 12.72% 21.87% 24.68% 49.72% 0.24% 4.47% 11.31% FIN 30 -0.29% -0.89% 0.76% 10.69% 21.66% 6.35% 5.63% 13.90% ALL SHARE ECONOMIC GROUP RESOURCES -9.30% -3.57% -8.35% 8.79% 17.84% 17.40% 17.93% 6.43% BAS MAT -9.75% -4.19% -9.07% 7.86% 16.68% 17.12% 17.74% 8.74% INDUST -2.82% 3.88% 9.60% 24.26% 47.85% -4.06% -1.75% 6.18% CON GDS -0.95% 4.61% 8.20% 14.99% 28.78% 7.87% 3.10% 13.19% HEALTH 16.38% 33.85% 47.38% 63.33% 63.30% 4.65% -6.72% 7.25% CON SRV -2.64% -6.60% 12.14% 25.32% 42.57% 4.38% 6.72% 18.47% TELECOMS 4.71% 24.05% 36.11% 74.51% 85.64% 15.35% 5.37% 5.88% FINAN 2.08% 13.23% 21.76% 26.43% 51.14% 0.02% 2.96% 10.86% TECHNOL -2.22% -19.21% -31.31% -20.64% -18.43% 4.36% -11.13% 4.17% ALL SHARE SHARE SECTOR CHEMICALS 25.35% 29.37% 33.60% 98.84% 114.53% -16.28% -2.66% 4.95% FORESTRY -9.15% -3.33% -12.99% 21.88% 22.77% 1.20% 8.34% 21.91% MINING -13.32% -14.47% -25.99% -13.80% -6.40% 18.35% 17.98% 7.64% CONSTRUCTION 4.63% 3.47% 20.00% 38.96% 40.64% -7.18% -2.99% -5.98% GENERAL IND -4.28% 2.54% 7.36% 18.65% 45.34% -5.53% -2.66% 8.82% ELECTRONIC -8.97% -6.33% -4.64% 39.56% 76.46% -8.40% -4.49% -3.25% IND TRN 6.38% 18.44% 25.30% 62.06% 84.01% 7.03% 4.92% 9.20% SUPPORT -0.44% 0.28% 31.32% 77.63% 120.46% 26.52% 15.83% 7.11% AUTOMOBILES 9.71% 36.04% 40.29% 68.87% 76.89% 30.29% 12.10% 9.71% BEVERAGES -0.57% -8.53% 8.67% 3.96% 21.06% 2.20% -5.70% 9.54% FOOD PR 6.40% 2.63% 4.44% 8.46% 14.57% -2.17% -4.36% 6.30% PERSON -1.82% -9.22% 10.66% 20.23% 41.02% 11.90% 14.97% 17.42% HEALTH -3.82% 6.37% 15.80% 25.44% 20.28% -5.29% -11.07% 4.90% PHARMACEUTIC 37.96% 65.74% 84.94% 110.69% 122.79% 15.52% -2.57% 9.55% DRG RET -2.71% 9.52% 13.96% 20.61% 27.39% 5.27% 5.83% 10.33% GEN RET 0.92% 14.77% 25.17% 58.81% 93.89% 5.13% 4.32% 9.20% TRAVEL 3.33% 13.01% 31.27% 61.30% 71.85% -18.94% -17.50% -1.30% FIX LN 4.71% 24.05% 36.11% MOBILE 4.71% 24.05% 36.11% BANKS 0.44% 14.99% 26.08% 29.67% 63.18% 3.15% 9.14% 13.46% N/L INS -0.09% -4.27% 1.92% -2.46% 2.27% -6.87% 4.85% 10.33% LIFE IN 3.90% 11.82% 18.32% 17.17% 33.64% -2.66% 3.15% 13.09% REAL ESTATE 2.37% 8.07% 19.01% 24.66% 66.41% 1.84% -0.40% GEN FIN 8.53% 8.96% 33.85% 52.66% 62.37% 4.50% 2.54% 9.89% EQ INV 1.55% -5.54% -1.26% -12.11% 47.92% 5.03% 1.85% 11.42% SOFTWARE -2.22% -19.21% -31.31% -20.64% -18.43% 4.36% -11.13% 4.63% SPECIALIST SA FIN 0.00% 0.29% 3.04% 13.64% 25.72% 4.82% 4.25% 12.55% SAPY (ZAR) -0.78% 5.94% 18.78% 26.39% 54.43% -6.77% -5.64% 5.46% SAPY ($) -4.61% 0.54% 16.58% 23.39% 71.21% -8.66% -7.35% -0.95% INDUST & FINAN -0.77% -4.30% -3.56% 8.93% 16.97% 7.50% 5.04% 13.35% CAPPED INDICES CAP TOP 40 -3.20% 0.82% 1.65% 14.42% 25.49% 9.06% 8.22% 11.59% CAP ALL SHARE -3.10% 0.50% 2.13% 15.15% 27.37% 8.84% 7.82% 11.58% SHAREHOLDER WEIGHTED SH WE TP 40 -1.75% -0.53% -4.03% 8.67% 18.30% 6.04% 5.35% 10.81% SH WE ALL SHARE -1.44% 0.51% -1.33% 11.78% 22.85% 6.38% 5.37% 10.92% Capped SH WE ALL SHARE -1.41% 3.19% 3.83% 16.92% 30.34% 6.49% 5.01% 10.61% SA VALUE -2.67% 5.40% 8.75% 23.89% 38.35% 5.84% 5.99% 8.07% SA GROWTH -3.38% -6.86% -9.55% 1.74% 10.05% 10.49% 8.94% 13.67% 9
Appendix A (2): Market Performances Periods up to 30 September 2021 1 month 3 months 6 months YTD 1 year 3 years 5 Years 10 Year CREDIT MARKETS BONDS 1-3 YEARS 0.05% 1.52% 2.94% 2.76% 4.04% 8.65% 8.37% 7.56% BONDS 3-7 YEARS -0.62% 1.16% 3.20% 1.44% 5.78% 10.72% 9.68% 8.73% BONDS 7-12 YEARS -2.15% 0.22% 6.88% 4.51% 12.03% 9.99% 9.21% 8.69% BONDS 12+ YEARS -2.96% -0.01% 10.07% 8.14% 17.59% 8.20% 7.85% 8.17% ALL BOND (ZAR) -2.12% 0.37% 7.25% 5.38% 12.46% 9.08% 8.51% 8.27% ALL BOND ($) -5.89% -4.74% 5.26% 2.89% 24.68% 6.88% 6.54% 1.69% ALL BOND (GBP) -3.94% -2.41% 7.71% 4.31% 19.54% 5.69% 5.78% 3.16% BLOOMBERG SA INFLATION BOND INDEX (ZAR) 0.40% 1.85% 5.10% 9.43% 14.99% 5.31% 3.39% 6.28% BLOOMBERG SA INFLATION BOND INDEX ($) -3.47% -3.33% 3.15% 6.83% 27.48% 3.18% 1.52% -0.18% STEFI Composite (ZAR) 0.31% 0.95% 1.88% 2.80% 3.80% 5.77% 6.43% 6.21% STEFI Composite ($) -3.55% -4.19% 0.00% 0.37% 15.08% 3.63% 4.50% -0.24% INTERNATIONAL MARKETS DOW JONES $ -4.20% -1.46% 3.54% 12.12% 24.15% 11.00% 15.67% 14.71% FTSE £ -0.96% 2.23% 7.95% 13.56% 27.90% 3.08% 5.36% 8.16% MSCI WORLD All Countries ($) -4.13% -1.05% 6.26% 11.12% 27.44% 12.58% 13.20% 11.90% MSCI WORLD All Countries (ZAR) -0.29% 4.26% 8.27% 13.81% 14.94% 14.90% 15.29% 19.14% MSCI WORLD $ - MSCI -4.15% -0.01% 7.74% 13.04% 28.82% 13.14% 13.74% 12.68% MSCI WORLD ZAR - MSCI -0.31% 5.36% 9.77% 15.78% 16.19% 15.47% 15.84% 19.97% MSCI WORLD $ - INET -4.29% -0.35% 6.93% 11.77% 27.01% 11.24% 11.60% 10.47% MSCI WORLD (ZAR) INET -0.45% 5.00% 8.95% 14.48% 14.56% 13.54% 13.67% 17.62% MSCI WORLD GROWTH ($) - MSCI -5.20% 0.83% 11.86% 12.19% 26.31% 19.53% 18.98% 15.98% MSCI WORLD GROWTH (ZAR) - MSCI -1.40% 6.25% 13.98% 14.91% 13.93% 21.99% 21.17% 23.49% MSCI WORLD VALUE ($) - MSCI -2.95% -0.67% 4.18% 14.33% 32.52% 7.48% 9.32% 10.35% MSCI WORLD VALUE (ZAR) - MSCI 0.95% 4.66% 6.14% 17.10% 19.53% 9.70% 11.34% 17.49% MSCI EMERGING MARKET($) - MSCI -3.96% -8.03% -3.36% -1.22% 18.15% 8.59% 9.24% 6.16% MSCI EMERGING MARKET(ZAR) - MSCI -0.11% -3.09% -1.53% 1.18% 6.57% 10.83% 11.26% 13.03% MSCI EMERGING MARKET($) - INET -4.25% -8.84% -4.81% -2.96% 15.81% 6.14% 6.77% 3.60% MSCI EMERGING MARKET(ZAR) - INET -0.41% -3.95% -3.01% -0.60% 4.46% 8.33% 8.74% 10.30% MSCI EM GROWTH ($) - MSCI -4.91% -10.94% -6.99% -6.54% 9.17% 12.07% 11.28% 8.28% MSCI EM GROWTH (ZAR) - MSCI -1.09% -6.16% -5.23% -4.28% -1.53% 14.38% 13.34% 15.28% MSCI EM VALUE ($) - MSCI -2.98% -4.92% 0.52% 4.51% 28.36% 4.74% 6.85% 3.93% MSCI EM VALUE (ZAR) - MSCI 0.91% 0.18% 2.42% 7.04% 15.78% 6.90% 8.83% 10.66% S&P 500 -4.65% 0.58% 9.18% 15.91% 29.99% 15.98% 16.88% 16.61% Euro Stoxx 50 (€) -3.37% -0.08% 5.15% 16.48% 29.79% 9.11% 9.42% 10.09% Nikkei 225 (¥) 5.41% 2.90% 1.62% 8.67% 28.76% 8.63% 14.17% 14.91% DAX(EUR) -3.63% -1.74% 1.68% 11.24% 19.59% 7.61% 7.74% 10.74% DAX(ZAR) -1.59% 1.18% 2.16% 7.92% 6.61% 9.75% 10.41% 16.19% Bloomberg Capital Global Aggregate Govt ($) -2.07% -1.04% 0.02% -5.11% -1.83% 3.83% 1.31% 1.07% JPM Global Government Bonds ($) -2.10% -1.08% -0.02% -5.67% -3.54% 3.82% 1.31% 1.17% JPM Global Government Bonds (ZAR) 1.82% 4.23% 1.87% -3.38% -12.99% 5.96% 3.19% 7.71% Bloomberg Capital World Govt ILB ($) -1.60% 2.06% 4.91% 2.16% 3.88% 6.31% 3.49% 4.11% Bloomberg Capital World Govt ILB (ZAR) 2.34% 7.53% 6.89% 4.63% -6.30% 8.50% 5.40% 10.85% Bloomberg Capital Global Aggregate ($) -1.78% -0.88% 0.42% -4.06% -0.91% 4.24% 1.99% 1.86% Bloomberg Capital Global Aggregate (ZAR) 2.16% 4.44% 2.31% -1.74% -10.62% 6.39% 3.88% 8.45% Bloomberg Capital Global Inflation Linked ($) -2.84% 0.61% 3.52% -0.02% 4.86% 6.48% 3.72% 3.38% Bloomberg Capital Global Inflation Linked (ZAR) 1.06% 6.01% 5.48% 2.40% -5.42% 8.68% 5.63% 10.06% Bloomberg Capital Global Aggregate Credit ($) -1.61% -0.81% 1.51% -2.72% 1.20% 5.63% 3.63% 3.67% Bloomberg Capital Global Aggregate Securitised ($) -0.71% -0.28% 0.25% -1.57% -0.49% 3.55% 2.06% 2.29% Bloomberg Capital Global High Yield ($) -1.10% -0.37% 2.68% 1.70% 9.49% 5.75% 5.32% 6.93% Bloomberg Capital Global Emerging Markets ($) -1.83% -0.80% 1.99% -1.76% 3.15% 5.49% 3.94% 5.34% JPM EM BONDS ($) -1.66% -0.55% 2.43% -1.14% 3.31% 5.73% 2.92% 5.11% JPM EM BONDS (ZAR) 2.28% 4.79% 4.36% 1.26% -6.81% 7.91% 4.83% 11.91% JPM EM Corporate Diversified HY ($) -1.61% -1.61% 0.42% -0.89% 3.45% 5.15% 4.79% 6.80% JPM EM Corporate Diversified HY (ZAR) 2.33% 3.67% 2.32% 1.52% -6.69% 7.32% 6.73% 13.71% JPM EM Corporate HY ($) -2.35% -1.65% 2.41% -0.90% 7.07% 6.83% 5.76% 7.54% JPM EM Corporate HY (ZAR) 1.56% 3.62% 4.34% 1.50% -3.43% 9.03% 7.72% 14.50% Bloomberg Capital EM Govt ILB ($) -0.49% 0.76% 0.52% -0.59% 1.56% 3.37% 2.11% 2.63% Bloomberg Capital EM Govt ILB (ZAR) 3.50% 6.17% 2.42% 1.82% -8.40% 5.50% 4.00% 9.27% Bloomberg Capital Global Corporate Bonds ($) -1.53% -0.76% 1.88% -2.44% 1.72% 6.00% 3.89% 3.97% Bloomberg Capital Global Corporate Bonds (ZAR) 2.42% 4.57% 3.80% -0.08% -8.25% 8.18% 5.81% 10.69% EPRA / NAREIT Dev Mrkts Property ($) -5.71% -0.73% 8.61% 15.23% 30.81% 7.15% 5.54% 9.25% EPRA / NAREIT Dev Mrkts Property (ZAR) -1.92% 4.60% 10.66% 18.02% 17.99% 9.36% 7.49% 16.32% HRFI HEDGE FUND INDEX ($) -0.40% -0.17% 2.24% 3.56% 8.64% 4.04% 3.56% 2.31% CURRENCY RAND vs US$ -3.86% -5.09% -1.85% -2.37% 10.87% -2.02% -1.81% -6.08% RAND vs EURO -2.07% -2.89% -0.47% 3.07% 12.18% -1.95% -2.41% -4.69% RAND vs GBP -1.87% -2.76% 0.43% -1.02% 6.30% -3.11% -2.52% -4.71% RAND vs JPY 1.56% 0.53% 0.97% 8.07% 5.73% -0.59% 1.97% 3.77% 10
Disclaimer
While every effort has been made to ensure the reasonableness and accuracy of the information contained in
this document ("the information"), Sanlam Multi Manager International, its shareholders, subsidiaries, clients,
agents, officers and employees (collectively referred to as "SMMI") do not make any representations or
warranties regarding the accuracy or suitability of the information. SMMI shall not be held responsible and
disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be
attributable, directly or indirectly, to any use of or reliance upon the information. The information does not
constitute financial advice. Information accurate as at 30 September 2021.
Sanlam Multi Manager International (Pty) Ltd which is approved as a Discretionary Financial Service Provider
in terms of the Financial Advisory and Intermediary Services Act, 2002.
Registration Number 2002/030939/07
Registered Offices
Address: Willie van Schoor Avenue, Bellville or
Private Bag X8, Tyger Valley, 7536, South Africa
Telephone: (+27-21) 950-2600
Fax: (+27-21) 950 2126
Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd
(“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Satrix Investments (Pty) Ltd, Amplify
Investment Partners (Pty) Ltd, Sanlam Capital Markets (Pty) Ltd (“SCM”), Sanlam Private Wealth (Pty) Ltd (“SPW”), Sanlam Credit Fund Advisor Proprietary Limited, Sanlam Africa
Real Estate Advisor Proprietary Limited and Sanlam Employee Benefits (“SEB”), a division of Sanlam Life Insurance Limited and Simeka Wealth (Pty) Ltd; and has the following
approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”) and Satrix Managers (RF) (Pty) Ltd
(“Satrix”). Sanlam Collective Investments (RF) (Pty) Ltd is a registered and approved Manager in terms of the Collective Investment Schemes Control Act. A schedule of fees can be
obtained from the Manager.
Collective investment schemes are generally medium- to long-term investments. Past performance is not necessarily a guide to future performance, and the value of investments/units
/unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager on request. Collective investments are traded at
ruling prices and can engage in borrowing and scrip lending. The Manager does not provide any guarantee with respect to either the capital or the return of a portfolio. The manager
has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. Income funds derive their income primarily from interest-
bearing instruments. The yield is current and is calculated on a daily basis. If the fund holds assets in foreign countries it could be exposed to the following risks regarding potential
constraints on liquidity and the repatriation of funds: macro-economic, political and foreign exchange.
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