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Tilman Friedrich’s Benchmarks October / November 2013

Tilman Friedrich is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. Tilman is co-founder, shareholder and managing director of RFS, retired chairperson, now trustee, of the Benchmark Retirement Fund.

As we reported previously, we expect global commodity and equity markets including local markets, to move sideways over the medium term.
Global commodity prices are at fairly elevated levels and we do not expect much support for the Rand and local miners from that source.
While foreign investors can still borrow extremely cheaply overseas and can still earn attractive returns on low risk investments in SA and other developing countries, we will continue to see foreign investment flows into local markets supporting local equities and a low interest rate environment.
The investor should however not expect returns much higher than the dividend yield, with very little or no capital appreciation in the medium term although in the short-term the more speculative investor may still be able to make hay while the sun shines.
Ignoring the scenario of deflation, interest rates will in the medium term rise slowly and buying opportunities in respect of fixed interest instruments will arise provided one invests to maturity.
As interest rates drift upwards, presenting buying opportunities in fixed interest instruments equities will lose some of their shine.
1741 AM Fair Value indices are always an interesting read.
For end September, they still indicate great buying opportunities in foreign equity markets, primarily EMU markets that are substantially below their fair value index (Austria -48%, Italy –53%, Portugal -22%, Spain -31%) but also Japan on -29%.
The US is considered overvalued by 35%.
 A weak Rand, and by our measure currently just slightly undervalued at its current value around 9.78 to the US versus fair value at around 9.65, suggests that one can invest offshore again.
A globally well diversified portfolio, comprising of value companies in the industrial, financial and technology sectors with strong cash flows and high dividend yields.
Listed property is likely to track the performance of equities in the short-term, implying short-term opportunities but are likely to feel the impact of an increase in interest rates more severely than equities.
 In terms of the weighting of the equity exposure we believe that foreign equity should be overweight relative to local equity, considering that local investors will hold the major portion of their assets locally.
Download the complete Benchtest fund investment overview for September 2013 and the Early Bird report for October 2013 at

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