The UK market has rallied over 9% year to date (the market was closed yesterday). But it remains just above a multi-year trading channel dating back to 1999. Investors and businesses don’t like policy uncertainty and Brexit has created almost three years of it. The most recent revelations of secret talks and renewed focus on a people vote add to the uncertainty.
We believe the UK market is pricing in the worst, and anything that can be viewed positively will ignite a rally. There are several ways to get UK exposure in your portfolio, but cautious investors should consider investing with downside protection.
Investec have introduced FTSE100 Auto Call, a five-year structured product paying 18% per annum if the index is positive. The product can mature (Auto Call) if the index is positive on the third, fourth and fifth anniversaries provide the index is positive. You could receive 54% after year 3, or 72% or 90%, after year 4 or 5 respectively. That’s even if the index is up just 1%.
If the Auto Call is still in play at the 5-year maturity but is down less than 40%, you will receive 100% of your investment. If the index is down more than 40%, then you are exposed to the full loss incurred. With the FTSE pricing in the worst, it’s unlikely to see the FTSE100 down 40% from these levels five years from now, but investors should be aware of the limited downside protection.
The Investec FTSE100 Auto Call closes 29 May, R100,000 minimum investment. Contact us at invest@finova.co.za for more information.
The week ahead:
- Local Data: Manufacturing: Production and sales (09/10)
- Results Due: AEE, RDF (06/05); DCP (07/05); REB, UPL (08/05); AEL, ILU, NT1 (09/05); EQU, KAL, OCE, VLE (10/05)
- LDT (06/05): ANH, ACT, EXX, NTCP, KST, WKF, ZED
Elections tomorrow could spark Ramaphoria 2.0 rally
Local and foreign investors are keenly awaiting tomorrows election and the outcome. There has been much written about it over the past weeks, and the base case is for around a 60% ANC majority win with President Ramaphosa getting the backing he needs to get tough on corruption and move forward with policy reforms. This should see the SA focused stocks rally strongly as they are trading in deep value territory with dividend yields the highest in years and forward PE ratios at the lowest in years.
Other Economic data releases of interest…
- Tuesday: MPC Member Cunliffe & Haldane Speak (UK); GDP, Cash Rate, RBA Rate Statement (AUS); Official Cash Rate, RBNZ Monetary Policy Statement, RBNZ Rate Statement (NZL); EU Economic Forecasts (EU); FOMC Member Quarles Speaks (USA); Ivey PMI (CAN); Trade Balance (CNY)
- Wednesday: MPC Member Ramsden Speaks (UK); FOMC Member Brainard Speaks (USA); ECB Monetary Policy Meeting Accounts (EU); CPI (CNY)
- Thursday: RBA Monetary Policy Statement (AUS); Trade Balance (CAN); Fed Chair Powell Speaks, PPI, Treasury Currency Report (USA)
- Friday: CPI, FOMC Member Brainard Speaks (USA); GDP, Manufacturing Production, Prelim Business Investment (UK); New Loans (CNY); Unemployment Rate (CAN)
Markets on rollercoaster ride over Trump’s ‘Trade Tantrum”
Trump’s Complacent investors received a rude awaken as Trump has another “Trade Tantrum” with China, which started on Sunday. This after investors have been waiting for a firm conclusion on the trade deal already ”agreed”. Volatility has spiked strongly, traders should use the increased volatility to their advantage.
