Research Portal

Intellidex Reviews for October 2018


In September JSE-listed ETFs gave up gains made in the prior month. An equally weighted portfolio of non-commodity JSE-listed ETFs lost 2.87%, with most of the damage emanating from ETFs that derive their constituents locally. International asset ETFs were down marginally by 0.53%. Intellidex’s September selection of seven equally-weighted ETF portfolio lost 1.97% (or 1.66% including cash).

The local view

The local bourse came under pressure during September, losing a staggering 5.05% on the back of major losses in industrial stocks (down 8.17%) and financials (down 3.14%). The industrial index and JSE top 40 vanilla market-cap based ETFs felt the pain of overexposure to Naspers, which was under pressure given that its main asset, Chinese internet company Tencent, is being hit by negative regulatory developments and suffered its worst growth metrics since it listed in 2004. Poor macroeconomic indicators released during September also weighed down the equities market.

The international view:

Except for Japanese equities, global equities were largely flat during September. The Sygnia/Itrix MSCI Japan ETF gained 3.34%. In September Prime Minster Shinzo Abe – who came into power in 2012 on the promise of massive stimulus to the economy – was re-elected as president of the ruling Liberal Democratic party, putting him on track to become Japan's longest-serving premier.  So far Japan has weathered the trade war storm reasonably well and posted economic growth of 3% in the second quarter, its strongest growth in two years.


ETFs featured


 New Call-to-action New call-to-action        

We also split international equities into developed and developing markets: 
The international equities offering of the JSE has been expanding. It started off with broad-based themes but has expanded into property funds and, more interestingly, technology funds. Again, our first priority is a broad-based fund. However, technology is a theme that is lacking in our local funds, and given its ever-increasing role in our lives, South African investors ought to gain increased exposure in technology funds to complete their portfolios and enhance sector diversification. 


Our preferred choice in the international ETF category is the Satrix MSCI World Equity Feeder ETF. It edged up 0.57% in September. The Satrix MSCI fund has exposure to the developed markets of the US, Europe, Japan, Canada and Australia.


The choice in this segment is limited to two funds: Satrix MSCI Emerging Markets (down 1.82% in July) and the Cloud Atlas AMI Big50 (down 5.84% in July). Our choice for Satrix MSCI Emerging Markets is still motivated by its diversification. It provides exposure to high-growth economies such as China and India, which are not included in any of the developed market funds, thus offering further diversification. The Satrix ETF, with a TER of 0.4%, tracks the MSCI Emerging Markets Investable Markets index, which captures companies across 23 countries. It's closest competition in this category, the Cloud Atlas AMI Big50 fund, with an African focus, has a higher TER of 0.75%.



New call-to-action

The CoreShares Equally Weighted Top 40 ETF is better diversified than most of its top 40 peers, which are concentrated in a few large counters. For instance, Naspers, which accounts for more than a fifth of the top 40 index, pulled back significantly during September which had a pronounced adverse effect on market-cap weighted top 40 funds. The CoreShares Equally Weighted Top 40 ETF overcomes this by investing equally in all 40 constituents. The fund declined 6.78% during September.


  Bonds and Cash:

Invest NewFunds TRACI 3-Month ETF New Call-to-action 

Short term pick (less than a year):

NewFunds TRACI 3 Month - it a natural choice because it is least sensitive to sudden adverse interest rate movements (up 0.54% in September). It is similar to earning interest on your cash at the bank with a minimal possibility of capital loss. 

Long-term pick:

Satrix ILBI ETFfor a longer investment horizon, protecting your investment against inflation is paramount (up 0.73% in Spetember). which offers the lowest expense ratio in this category. Furthermore, nominal bonds add a unique risk-return dimension that differs from inflation-linked bonds and improves overall portfolio performance.

Bonds and cash are good additions to portfolios not only because of their diversification qualities but also for their ability to enhance returns. We think investors can choose any between Stanlib Global Bond ETF (down 1.59% in September) or Ashburton World Government Bond ETF (down 1.17% in September). They track investment-grade sovereign bonds mostly issued by the US, UK Japan, and selected European countries.  Their TERs differ by just 0.05 percentage points with the Stanlib Global Bond ETF being the cheapest.



If you rely on your investment income for day-to-day expenses you may want to allocate a portion of your portfolio to ETFs that have a high distribution ratio. Naturally, Satrix Dividend Plus and CoreShares S&P South Africa Dividend Aristocrats come to mind here, but similarly, property funds are high dividend payers. There are two investable property indices available: SA listed property and the capped property index. We maintain our choice of the capped fund Satrix Property ETF (down 2.54% in September). It has a dividend yield of 6.35% and its TER is expected to be the lowest in the segment. However, investors can also consider foreign property ETFs. The Sygnia Itrix Global Property ETF (down 2.9% in September), with a TER of 0.25%, is by far the cheapest of the three.



I want to participate in the Satrix Quality IPO I want to participate in the Satrix Quality IPO

 If you find the process of diversifying your portfolio daunting, these two ETFs do it for you. They combine equities and bonds to produce a diversified portfolio for two investor archetypes. They are designed to meet two different risk appetites:

Mapps Protect is more conservative, suitable for conservative, usually older, savers.
Mapps Growth suits investors with a long-term horizon.
They declined 3.45% and 6.63% respectively in September. 


This is just a sneak peak at the insights Intellidex have prepared for you. To see more in-depth analysis and market insights (global and local), check out the full note  here.


Background: Exchange-traded funds (ETFs)

Exchange-traded funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to numerous companies in a single transaction. ETFs can be traded through your broker in the same way as shares, say, on the EasyEquities platform. In addition, they qualify for the tax-free savings account, where both capital and income gains accumulate tax free.

Benefits of ETFs

  • Gain instant exposure to various underlying shares or bonds in one transaction
  • They diversify risk because a single ETF holds various shares
  • They are cost-effective
  • They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
  • High transparency through daily published index constituents

If you thought this blog was interesting, you should also read:

Intellidex Reviews:
August 2018 Picks 


This research report was issued by Intellidex (Pty) Ltd. Intellidex aims to deliver impartial and objective assessments of securities, companies or other subjects. This document is issued for information purposes only and is not an offer to purchase or sell investments or related financial instruments. Individuals should undertake their own analysis and/or seek professional advice based on their specific needs before purchasing or selling investments. The information contained in this report is based on sources that Intellidex believes to be reliable, but Intellidex makes no representations or warranties regarding the completeness, accuracy or reliability of any information, facts, estimates, forecasts or opinions contained in this document. The information, opinions, estimates, assumptions, target prices and forecasts could change at any time without prior notice. Intellidex is under no obligation to inform any recipient of this document of any such changes. Intellidex, its directors, officers, staff, agents or associates shall have no liability for any loss or damage of any nature arising from the use of this document.


The opinions or recommendations contained in this report represent the true views of the analyst(s) responsible for preparing the report. The analyst’s remuneration is not affected by the opinions or recommendations contained in this report, although his/her remuneration may be affected by the overall quality of their research, feedback from clients and the financial performance of Intellidex (Pty) Ltd.

Intellidex staff may hold positions in financial instruments or derivatives thereof which are discussed in this document. Trades by staff are subject to Intellidex’s code of conduct which can be obtained by emailing mail@intellidex.coza.

Intellidex may also have, or be seeking to have, a consulting or other professional relationship with the companies mentioned in this report.