Sygnia Itrix Top 40 ETF
The Top 40 and All Share indices are down 14.4% and 13.5% year-to-date, as high inflation, hawkish monetary policy and economic growth concerns sent global equity prices lower throughout this year. South Africa’s low fixed investment, crippling bouts of load-shedding and weak economic conditions have exacerbated the decline in local equities.
However, an opportunity may await the patient investor willing to take on risk, especially as the bearish trend in local equities implies that the market is relatively cheaper. Despite this, it is important to note that the Top 40 will also be affected by the rest of the sectors that make up the index, which will ultimately be driven by local and global economic developments. Shares in basic materials sector, which make up 29.4% of the Sygnia Itrix Top 40 ETF, have come under pressure as commodity prices have trended downwards since peaks reached in the first half of 2022. As noted by Trading Economics, the Core Commodity CRB Index declined to 285 points, virtually expunging all gains made since the Russia-Ukraine conflict and down nearly 20% since its peak in June 2022 as a stronger US dollar and forecasts of a recession in 2023 led investors to unwind bullish positions.
Mining giant Anglo American plc, whose operations span across diamonds, copper, platinum group metals and base metals is well positioned for commodities of the future including platinum group metals and copper. Copper is known for its versatile industrial uses in various sectors including modern electronics, thermal equipment, construction and electricity generation. In its 2021 integrated annual report, Anglo American describes copper as being crucial in the transition from fossil fuels to sustainable energy sources, including solar and wind. Global renewable energy capacity is expected to increase over 8.0% in 2022 compared to last year, pushing through the 300 gigawatt (GW) mark for the first time as noted by the International Energy Agency (IEA) in May 2022. Three hundred gigawatts, the equivalent of 300,000 megawatts (MW), is almost seven times higher than the official total power station capacity (46,466MW) as indicated by Eskom in its 2021 integrated annual report.
This is a high-risk, passively managed index tracking fund, registered as a collective investment scheme and is listed on the JSE as an ETF. The investment objective of the ETF is to track the FTSE/JSE Top 40 Index as closely as possible by holding a portfolio of securities representative of the composition and weighting of the securities contained in the index. The Fund has a 100% strategic allocation to South African equities.
Fund suitability
-
This ETF is ideal for investors seeking broad exposure to the SA equity market. It also provides a natural hedge to rand weakness as some companies generate offshore earnings. However, investors need to be prepared for short-term losses, which often occur when investing in equities. Consequently, this fund is suited to investors with a high-risk tolerance and an investment horizon of at least five years.
Fees
- The fund has a total investment cost of 0.24%.
Top Holdings
-
While consumer technology and internet giant Naspers dominated local equity indices in the past, the decline in its share price (for most of 2021) has reduced its high weight in local market-capitalisation weighted indices.
Sygnia Itrix Top 40 ETF (JSE:SYGT40)
New to investing and want to learn more about other ETFs?
Read: Top Fund Picks for December
Compare ETFs on EasyETFs
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
Disclaimer
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.
Remuneration
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.