Dear Investor,

On 1 November 2021 South Africans will be heading to the polls to elect the leaders of the country’s 257 municipalities. Most of our municipalities (especially ANC managed) are currently in a bad and bankrupt state because of corruption and poor management by municipal councilors.

Local elections provide you with a chance to elect a political party that will manage your taxes effectively. Voting for a party with a solid service delivery manifesto is critical as good service delivery will improve your day-to-day life. Do your part in convincing fence sitters and the misinformed. If each person convinces just one person to not vote ANC, our municipalities have a chance to thrive again and do what they are supposed to do… Service Delivery!

In this month’s newsletter we cover the following topics:

1. Tough month for the equity markets
2. Where there is a “will” there is a way forward
3. Capital protected investment opportunities
4. Rand forecasts
5. Fuel prices
6. Chart of the month
7. Interesting stats for the month
8. Market stats summary
9. Financial Indicators as at 30 September 2021
10. Disclaimer

1. Tough month for the equity markets

September’21 turned out to be a very tough month for the equity markets. There was nowhere to hide with most major indices ending in the red:

Index	Base currency	*In ZAR
JSE All-Share Index	-3.56%	-3.56%
S&P 500 (US)	-4.79%	-0.23%
Europe excl UK	-4.24%	1.91%
Emerging Markets	-4.52%	-0.17%

*The reason foreign indices did not perform as badly when measured in Rand (ZAR) is because the ZAR weakened almost 4% against the US Dollar during the month of September’21

Main contributors to the decline in equity markets are from the two biggest economies and can be summarised as follows:

United State of America

• Rising inflation in the US – Likely to be transitory due to supply chain disruptions caused by the pandemic. The US inflation is currently 5.3%
• Prospect of tapering – US Fed will most probably start pulling back the stimulus they’ve provided during the pandemic by the end of 2021
• US rate hikes – Tapering has kept rates low but as that comes to an end, we will see interest rate hikes in 2022

China

• Common prosperity drive – Aiming at eroding monopolies and protecting fair market competition with the goal of protecting consumer rights and interests
• Protection of personal information law changes – Regulating the collection, use of data, and to promote the rational use of personal information
• Electricity shortages in China – As a result of soaring fuel prices and coal shortages, while implementing green energy policies
• Evergrande debt crisis – Evergrande is one of China’s largest real estate developers and came into the news when it missed two bond interest payments over the past week

2. Where there is a “will”, there is a way forward

September’21 marked “wills month” and it is scary to think that about 70% of South Africans do not have valid wills. Setting up a will is not a complicated process or document, so why do so many people not have a valid will? Below are a few reasons we’ve come across in our experience

• Not ready to make important life decisions – Many people think that their wills are cast in stone and whatever they put in there is for life. It is important to make the first step and get something in place. You can always revise your will as your circumstances change
• Unaware of the consequences of not having a will – Ignorance is bliss, and you will save your family a lot of hardship by just ensuring a will is in place
• Avoiding dealing with family issues – Working with an independent person/lawyer could assist with confronting and even resolve issues from the past
• Too expensive to put a will in place – These days lawyers will create and even store your will at zero fees. For this service they would however like to be nominated as the executor of your estate, at which point their fees can be negotiated and accordingly documented in your will

Below 5 consequences of not having a valid will in place:

1. You forfeit the opportunity to decide who inherits what and your estate is distributed according to South African law. This means people who you may not have wanted to benefit from your estate may inherit your estate
2. Your partner may be left with nothing if you are not married, or your will is not updated from a previous marriage.
3. Your children’s inheritance could pass to the government guardian’s fund or appointed guardian rather than to a trust that will ensure your wishes for them are carried out.
4. Family feuds often occur when family members argue over the distribution of your estate when final wishes are not clearly documented in a will.
5. Winding up your Estate can take years – without a will or appointing a professional executor, the government is essentially in control of the proces

Contact Vista Wealth should you require assistance with estate planning and creation of a valid will.

3.  Capital protected Investment opportunities

Capital protected investments are investments that offer full to partial capital guarantee (expressed as a percentage) on the initial invested amount. The percentage capital protected usually depends on the underlying investment’s performance.

The readers who are familiar with our investment strategy know that we prefer to include capital protected investments in our portfolios. It creates a margin of safety in the portfolio which can protect the investor if things really start going south.

With interest rates currently at historical lows and equity market uncertainty, capital protected investments might be a solution for savers or conservative investors with a low-risk appetite.

Below capital protected investment opportunities currently available:

#	Issuer	* Investment name	Currency	Underlying portfolio/index	Capital protection	Hosted within	Term and potential return ————————————————	Minimum	Participation cut-off date
1	Glacier SA	Sustainable World Enhancer	ZAR	Portfolio of global companies	100%	Glacier SA platform	5Y geared return @ 400% (4 times) if positive	R100k	Monthly
2	Investec	ASX 200 Digital Plus	ZAR	S&P ASX 200	First 30% decline protected	JSE share portfolio	3.5Y investment term with a a minimum return of 55% in ZAR if the index ends flat or positive	R100k	Closed
3	ABSA	Twin Fixed Return and Growth Protector – Issue 31	ZAR	Combination of Fixed returns (Y1 & Y3) and Portfolio of global companies	100%	JSE share portfolio	1Y fixed return @ 15% on 25% of capital 3Y fixed return @ 30% on 25% of capital 5Y geared return @ 150% on remaining 50% of capital, if positive	R500k	13 Oct’21 Monthly
4	ABSA	Global Growth Basket – Issue 27	USD	Portfolio of global companies	95% capital-protected	Glacier International	5Y geared return @ 120% (1.2 times) if positive	$25k or $10k for existing clients	1 Oct’21
5	Investec	International Titans Basket Limited	USD	MSCI World 4% decrement index	100%	Glacier International	5Y term with 100% participation if positive	$25k or $10k for existing clients	8 Oct’21
6	Sanlam Private Wealth	Global Innovative Technologies	USD	Nasdaq Yewno Global Innovative Tech Index	100%	Glacier International – DMA Account	5Y term with 100% participation if positive	$25k or $10k for existing clients	11 Oct’21
7	ABSA	Performance Plus Note	USD	Nasdaq Yewno Global Innovative Tech Index	First 40% decline protected	Glacier International	5Y term with the greater of 20% or index performance if positive	$25k or $10k for existing clients	15 Nov’21

* Click on the investment name to see the detailed investment brochure

Important notes about the above table:

• Even though all the above-mentioned investments have international equity exposure, four of the investments are in USD
• Individuals, companies, trusts or partnerships can utilise the Asset Swap functionality explained in our August’21 newsletter to invest in the USD capital protected investment opportunities
• No need to negotiate issuer or advisor fees as it is priced into the products and will not affect the investor’s initial capital investment or return

4. Rand forecasts

As mentioned in our introduction, it is all about the US and China with the first reporting unemployment numbers on Friday. A decline in the number of unemployed US citizens will signal an improvement in the US economy.

The missing of interest rate payments and the share suspension of Chinese real estate developer Evergrande has made investors cautious of emerging markets, causing our currency to weaken.

Lastly, an increase in coal export prices has helped stabilise the Rand. Specifically, the Richards Bay coal price has surged by almost 30% – exceeding $200 per ton. This has countered the loss in export revenue from a declining iron ore price.

Below Investec’s exchange rate forecasts as published during the month of September’21:

5.  Fuel prices

According to the AA, a decrease in petrol and an increase in diesel prices are expected for October’21. They expect a drop of between 1 and 4 cents per litre for petrol, and a 22.8 cents drop per litre for diesel:

• Petrol 95 – Set for a decrease of 1 cents per litre
• Petrol 93 – Set for a decrease of 4 cents per litre
• Both grades of diesel – Set for a increase of 22.8 cents per litre
• Illuminating Paraffin – Set for increase of 43 cents per litre

6. Chart of the month

The chart below shows the liquidity injections by the PBOC (People’s Bank of China, China’s central bank) into their financial system since January 2020. The bank reiterated it was to fulfil a surge in seasonal demand for cash and to ensure that there is sufficient liquidity ahead of regulatory checks, but this will also act to calm fears and help avoid financial contagion resulting from the Evergrande crisis.

Whilst the latest injections look very significant in the context of recent months, they are dwarfed by the scale of injections that occurred in early 2020, interestingly some weeks before markets in the developed world cottoned on to the reality that the perceived localised coronavirus problem was in fact a crisis of global scale.

Source: Bloomberg Finance L.P., Momentum Global Investment Management. Data to 28 September 2021.

7. Interesting stats for the month

• 6.13 billion – the estimated number of Covid-19 vaccine shots given. Global population is 7.8bn
• 6% – how much Pfizer’s vaccine efficacy falls by every two months after the second dose
• $60bn – the amount Microsoft announced it would spend on share buybacks
• $210bn – the estimated total hit to 2021 revenue for the world’s automakers due to the shortage of semi-conductors.
• 53% – of British people believe that Brexit is going poorly
• 10 000 – the number of hard-to-fill positions in the South African IT sector as stated by the 2021 ICT Skills Survey
• R26m – the estimate to how much South African tourism loses every day that the country remains on the UK red list

*Credit to Kim Litter from Ninety-One for the above interesting stats

8. Market stats summary

The red block shows the market stats for the month of September 2021. In short, the JSE All Share Total Return index was down ↓-3.1% for the month (up ↑23.2% for the last 12 months). The Resources sector was the worst performing sector for the month, down ↓-12.3%. The Industrial sector was down ↓-1.4% and the Listed Property sector was down ↓-0.8% for the month. The Financial sector was the only sector positive for the month, up a modest ↑1.3%.

 

9. Financial indicators as at 30 September 2021

Global indices (NB! Returns are measured in Rand percentage points. For example, the S&P 500 was down  -0.23% for the month as measured in Rands)

JSE Sectors:

Currencies (NB! Positive indicates ZAR has weakened for the period, vice versa)

Interest Rates:

10. Disclaimer

The information contained in this e-mail is of a general nature and is not a substitute for professional advice. We recommended that you obtain specific professional advice before you take any action. Vista Wealth Management takes all reasonable steps to ensure that the content of this e-mail is accurate and up to date, however, errors and omissions may occur. The accuracy of the information contained should therefore not be relied upon as a statement of fact.