Investment update | Beyond the active versus passive debate

SouthAfrican markets closed in the green on Thursday, buoyed by gains in mining sectorstocks. Gold miners, Sibanye Stillwater, Harmony Gold Mining Co., Gold Fieldsand AngloGold Ashanti surged 9.9%, 9.3%, 4.0% and 3.5%, respectively.Diversified miners, African Rainbow Minerals, Pan African Resources and AngloAmerican jumped 6.8%, 3.3% and 2.4%, respectively.

Platinum miners, ImpalaPlatinum, Anglo American Platinum and Northam Platinum advanced 6.3%, 5.5% and4.9%, respectively. Lenders, Nedbank Group, Absa Group and FirstRand added1.5%, 1.2% and 0.7%, respectively. On the flipside, property developers, EmiraProperty Fund, Growthpoint Properties and Attacq dropped 3.5%, 2.5% and 1.1%,respectively. The JSE All Share index advanced 1.0% to close at 81,668.39.

FirstRand Limited: The banking company, in its FY24results, indicated that its interest and similar income rose to R189.52bn fromR151.89bn posted in the previous year. Its diluted EPS rose 5.1% to 681.40cfrom the prior year.

Discovery Limited: The insurance company, in its tradingupdate for the year ended 30 June 2024, revealed that it expects EPS to be 8.0%to 13.0%, higher as compared to 972.60c recorded in the previous year. Also, itexpects HEPS to be 4.0% to 9.0%, higher as compared to 1,021.50c recorded inthe previous year.

SA Corporate Real Estate Limited:The real estate investment trust company, in its 1H24 results, reported thatits revenue advanced 31.4% to R1.46bn from the preceding year. Its diluted EPSstood at 16.23c, compared with 16.72c recorded in the previous year.

Sibanye Stillwater Limited: The gold miningcompany, in its 1H24 results, stated that its revenues dropped to R55.20bn fromR60.57bn posted in the previous year. Its diluted loss per share stood at264.00c, compared with an EPS of 262.00c recorded in the previous year.

On Thursday, the South African rand strengthened against the US dollar. In the US, initial jobless claims rose in the week ended 6 September 2024, in line with market expectations. Moreover, the producer price index (PPI) rose more than expected in August.The yield on benchmark bonds rose yesterday. The yield on the SA 10-year generic bond advanced to 10.43%, while that for SA 20-year generic rose to 11.07%

At 05:30 SAST, the US dollar is trading 0.1% lower against the South African rand at R17.7385, while the euro is trading slightly lower at R19.6846. At 05:30 SAST, the British pound has gained 0.2% against the South African rand to trade at R23.341.

Market update by Anchor Capital

UK markets finished firmer yesterday, boosted by gains in mining sector stocks. Miners Fresnillo, Glencore, Antofagasta and Rio Tinto advanced 3.7%, 2.7%, 2.3% and 1.9%, respectively. Homebuilders, Persimmon and Taylor Wimpey gained 2.6% and 2.2%, respectively. Banking firms, Barclays, HSBC Holdings and Lloyds Banking Group rose 1.6%, 1.0% and 0.8%, respectively.

Energy companies, BP and Shell added 1.2% and 1.1%, respectively. On the other hand, pharmaceutical companies, AstraZeneca and GSK dropped 2.1% and 1.0%, respectively. Water utilities companies, Severn Trent and United Utilities Group declined 1.2% and 0.6%, respectively. The FTSE 100 index advanced 0.6% to close at 8,240.97.

US markets ended higher yesterday, as softer than expected domestic inflation data reignited hopes for a 25-basis point rate cut by the Federal Reserve in its September policy meeting. Retailer, Kroger surged 7.2%, after the company reported better than expected 2Q24 earnings and raised the lower end of its annual sales forecast.

On the contrary, pharmaceutical company, Moderna plunged 12.4%, after the company announced its plans to reduce its research & development budget by about 20% over the next three years and projected lower than expected sales of $2.50bn - $3.50bn in FY25. The S&P 500 index rose 0.7% to settle at 5,595.76, while the DJIA index advanced 0.6% to close at 41,096.77. The NASDAQ index climbed 1.0% to end the trading session at 17,569.68.

Asian markets are trading mostly lower this morning.

In Japan, pharmaceutical company, Astellas Pharma has shed 3.3%. On the flipside, precision machines company, Disco Corporation has added 1.4%. In Hong Kong, real estate company, Longfor Group Holdings has advanced 4.0%. Pharmaceutical company, Sino Biopharmaceutical has gained 3.5%. In South Korea, paper company, Shin Poong Paper Manufacturing has dropped 5.1%. On the contrary, electronics company, Daidong Electronics has surged 16.1%. The Nikkei 225 index is trading 0.9% lower at 36,507.10. The Hang Seng index has gained 1.0% to trade at 17,418.85, while the Kospi index is trading 0.1% lower at 2,569.11.

At 05:30 SAST today, Brent prices rose 0.4% to trade at $72.25/bl.

Yesterday, Brent prices rose 1.9% to settle at $71.97/bl, after Hurricane Francine led to disruptions in the US oil and gas production in the Gulf of Mexico.

At 05:30 SAST on Friday morning, gold prices advanced 0.3% to trade at $2,567.65/oz.

On Thursday, gold gained 1.9% to close at $2,558.75/oz, supported by expectations of an interest rate cut by the US Federal Reserve next week

On Thursday, copper rose 1.2% to close at $9,115.50/mt. Aluminium closed 1.9% higher at $2,415.67/mt.

Market update by Anchor Capital

Francois Louw,Overberg Asset Management

The debate between active and passive portfolio management continues to stir discussions among investors and fund managers. While many favour one approach over the other, some find a blend of both strategies most effective.

A key element in the passive investment world is the exchange traded fund (ETF).

In its traditional form, ETFs are pooled investment securities that trade on exchanges like stocks. It aims to track specific groups of underlying assets or indices like the S&P 500 index.

South African investors, for instance, can choose from 82 different ETFs listed on the JSE.

Features of passive ETFs:

• Diversification: ETFs, as pooled investments, spread risk across various asset classes, sectors, and geographic areas, enhancing portfolio stability.
• Offshore exposure: These vehicles offer a simple and cost-effective way for local investors to gain indirect exposure to international markets.
• Liquidity: Market makers ensure that ETFs maintain adequate liquidity, facilitating easy buying and selling.

Pitfalls of passive ETFs:

• Selection: Risk and return levels can vary significantly among ETFs. Buying one that does not align with your investment goals could lead to poor performance.
• Concentration: Certain ETFs focus on specific sectors or asset classes, which can lead to significant financial losses during bearish cycles if used in isolation.

The conversation has moved beyond a simple active versus passive debate.

By incorporating passive ETFs into an actively managed portfolio, investors can leverage a powerful tool that enhances diversification and boosts growth potential. Incorporating this asset class also allows investment managers to focus more on the actively managed portion of the portfolio.

Francois Louw is a wealth manager in the Gauteng office of Overberg Asset Management.

Chart of the day

Disclaimer: News24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, News24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.