Corospondent - April 2017

Quarterly Publication - April 2017

Autumn Edition

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Kirshni Totaram

Kirshni Totaram

Kirshni is Global Head of Institutional Business. She joined Coronation in 2000.

It has been a period of profound political and economic change around the world. The shocking developments of 2016 continue to shift the ground under our feet. The new US president keeps on upsetting geopolitics, while the UK premier, Theresa May, recently triggered the famed Article 50, following the surprise outcome of the Brexit vote in June last year. So for the Brits, it is, “See EU later!” - an apt headline from The Sun newspaper.

Throughout the world, the vox populi is growing louder and louder, with people everywhere expressing a universal discontent with the established world order. People are simply fed up with being left behind, which they blame on globalisation. Understandably, they want to see economic prosperity that does not only benefit a few. However, their discontent is channelled towards causes  (protectionism, anti-immigration, nationalism) that will not necessarily serve their own interests, or that of the broader society, in the long run. This will have a concerning impact on the direction that economic vectors are pointing.

Back home, the last few weeks have felt surreal (and not in a good way). South Africans too are currently living through extraordinary times of political and economic crisis. The midnight hour cabinet reshuffle at the end of March has triggered a shockwave of rating downgrades, the effects of which will be felt for years to come. We lost our investment grade rating, which was secured through great discipline 17 years ago. This achievement by the first democratically elected government has had a tremendously positive impact on the domestic economy. 

Political events have most likely delivered a ‘knockout blow’ to the nascent economic recovery we had been optimistically hoping for. The situation has the most serious consequences for the poor who have no defence against the economic fallout unleashed by infighting in the ruling party. A culture of corruption and patronage is truly ripping South Africa apart. 

Against a turbulent background, this bumper edition of Corospondent contains our analysis of the many (concerning) events unfolding around the world. In the lead article, Neville Chester dissects the impact of the recent events on SA and the aftershocks that await investors and the economy.  

It is in turbulent times like these that we are continually reminded that risk is an integral and unavoidable part of life. And the first rule of investing is to ensure that you allocate capital to those opportunities that will appropriately reward you for the risk you have taken. Most of us like to just talk return: it's simple and, let's face it, easier to understand. In his article, our CIO, Karl Leinberger, takes a closer look at the vital role that risk management plays in investments. I found it a very timely read for this new era of uncertainty. 

The rise of populism is a significant force around the world. Our economist, Marie Antelme, examines the causes and economic ramifications of this strong political doctrine of our time.

Times of stress and great emotion in markets often present great investment opportunities, and as always we continue to invest in long-term holdings that we believe will unlock value for our clients. In this issue, you will find our views on opportunities in frontier markets, in a Russian banking behemoth and in the local mobile telecommunication group MTN

History has taught us, time and time again, that our ability to forecast the immediate future is limited. Our focus remains on building diversified portfolios of undervalued assets that can withstand the shocks that seem to keep coming our way. We have been steadfast in our focus and commitment to deliver investment excellence for our clients. 

Usually, at this point, I would urge you to enjoy the read. In truth, I cannot guarantee you a pleasant reading experience this time around. But I do hope that you find our insights useful, providing you with some security and clarity in these pressured times.