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A member of the FirstRand Group 2010 - a bumpy road ahead? Speakers Tristan Hanson Jonathan Schiessl Craig Farley Investment Presentation Jersey – February.

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Presentation on theme: "A member of the FirstRand Group 2010 - a bumpy road ahead? Speakers Tristan Hanson Jonathan Schiessl Craig Farley Investment Presentation Jersey – February."— Presentation transcript:

1 A member of the FirstRand Group a bumpy road ahead? Speakers Tristan Hanson Jonathan Schiessl Craig Farley Investment Presentation Jersey – February 2010

2 A member of the FirstRand Group Climate change Tristan Hanson Crisis, Recovery…What Next? Investing in an Uncertain World May 2010

3 A member of the FirstRand Group A stronger than anticipated recovery Source: IMF IMF growth forecasts: EUJapanUSAAsian NICs BrazilIndiaChina % Apr '09 forecast Apr '10 forecast

4 A member of the FirstRand Group Agenda Three Issues:  Sovereign debt in developed countries  Is China’s growth sustainable?  US unemployment & consumer spending Implications for asset allocation

5 A member of the FirstRand Group Why Greece?  Loss of credibility  Persistent budget deficits  Unsustainable debt dynamics  debt outstanding  size of budget deficit  demography

6 A member of the FirstRand Group Greek finances: worst of a bad bunch Budget Surplus/Deficit (% of GDP) Avg: Germany Greece Ireland Italy Portugal Spain UK US Source: EC, CBO, IMF, Barclays Capital Gross Public Debt (% of GDP) US UK Germany France Greece Spain Italy Ireland Portugal

7 A member of the FirstRand Group Euro periphery compared Source: Bloomberg Debt (€m)Credit Rating % debt externalDebt Issuance (€bn) S&PFitch Greece273BB+BBB Portugal126A-AA-7221 Ireland105AAAA Spain560AAAAA Italy1,761A

8 A member of the FirstRand Group Greek contagion: how serious is it? Source: Bloomberg European 10yr bond yields May'10Change YTD (bps) Germany Netherlands France Italy4.1-7 Spain4.220 Ireland5.673 Portugal Greece

9 A member of the FirstRand Group No contagion to core of Euro-area Source: Bloomberg German & French 10yr bond yields Apr-09Jul-09Oct-09Jan-10Apr-10 Germany France

10 A member of the FirstRand Group Scepticism merited when price drives opinion Oct. 16 (Bloomberg) – “The dollar will extend its drop versus the euro over the next two to five years, falling as much as 20% to an all-time low under a widening budget deficit, Harvard University’s Professor Niall Ferguson said.” Source: Bloomberg US dollar strength May-09Aug-09Nov-09Feb-10May-10 €/$

11 A member of the FirstRand Group Conclusion: “nothing to fear but fear itself?”  Europe’s Achilles heel: one currency, 16 finance ministers  EU/IMF deal should ringfence Greece into 2012  Spain & Italy: too big to save = too big to fail?  Austerity packages are deflationary  Printing money can eliminate default risk in low inflation world (US, UK)  Behavioural Perspective: the legacy of the 2008 financial crisis is still with us…are we now preconditioned to fear the worst in any shock/contagion event?

12 A member of the FirstRand Group China: stimulus-led recovery Source: World Bank

13 A member of the FirstRand Group Chinese property: bubble territory? Source: World Bank

14 A member of the FirstRand Group China’s growth potential remains huge Source: PWT, WB GDP per capita (US$, PPP terms) Brazil10,080 South Africa9,790 Colombia8,430 Ecuador7,780 Jamaica7,370 Namibia6,250 China6,010 Sri Lanka4,460 India2,930 Sierra Leone770 GDP per capita relative to the USA PPP terms % Japan Taiwan Korea China

15 A member of the FirstRand Group China: industrial profitability has improved Source: Macquarie

16 A member of the FirstRand Group US household balance sheet Source: Federal Reserve, Bloomberg % of disposable income Assets Net Worth Debt

17 A member of the FirstRand Group Debt remains high; service cost declining Source: Federal Reserve Mar-80Mar-83Mar-86Mar-89 Mar-92Mar-95Mar-98Mar-01Mar-04Mar-07 % of disposable income Debt Service Ratio

18 A member of the FirstRand Group US: job losses vs GDP declines Source: Bloomberg, Barclays Capital Declines in US GDP & Employment compared -7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% Avg: /022008/09 GDP Employment

19 A member of the FirstRand Group Replica Asset Management: asset allocation Source: Ashburton Replica Asset Management Asset Allocation (28/04/10) Equities* Govt/quasi-govt Inflation-protected DM - IG corporate DM - High Yield corporate EM - IG corporate EM - govt/quasi-govt FRNs Effective Cash *net of put options DM=developed markets EM=emerging markets Currency Weightings (%) – 30/04/10 £$€ EU--72 US-905 UK95-8 JPN--- ASIA4914 Other111

20 A member of the FirstRand Group Replica Asset Management: performance Source: Lipper Ashburton Replica Sterling Asset Management MSCI World TR LC Percentage Growth Total Return, Tax Default, In LC 3 Years From 30/03/2007 To 31/03/2010 Percentage Growth /200707/200710/200701/200804/200807/200810/200801/200904/200907/200910/200901/2010

21 DISCLAIMER - SA Ashburton (Jersey) Limited is referred to in this context as ‘Ashburton’. This document does not constitute an offer or solicitation to any person in any jurisdiction in which Ashburton is not authorised or permitted to communicate with potential investors, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this document, and should be satisfied in doing so that there is no breach of local legislation or regulation. The information is intended solely for use by Ashburton clients or prospective clients, and should not be reproduced or distributed except via original recipients acting as professional intermediaries. This document is not for distribution in the United States. Prospective investors should inform themselves and if need be take appropriate advice regarding applicable legal, taxation and exchange control regulations in countries of their citizenship, residence or domicile which may be relevant to the acquisition, holding, transfer, redemption or disposal of any investments herein solicited. Any opinions expressed herein are those at the date this material is issued. Data, models and other statistics are sourced from our own records, unless otherwise stated. Ashburton believes that the information contained is from reliable sources, but we do not guarantee the relevance, accuracy or completeness thereof. We caution that the value of investments and the income derived, may fluctuate and it is possible that an investor may incur losses, including a loss of the principal invested. Past performance is not generally indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Ashburton (Jersey) Limited (Co Reg No ) is a member of the FirstRand Group, is regulated by the Jersey Financial Services Commission and has its registered office at 17 Hilary Street, St Helier, Jersey JE4 8SJ. Ashburton (Jersey) Limited is registered as a Foreign Investment Services Provider in South Africa in accordance with Section 8 of the Financial Advisory & Intermediary Services Act 2002.


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