THE POWER OF INDEPENDENT ADVICE

Brenthurst Wealth Management (PTY) LTD FSP No. 7833

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WEEK IN REVIEW

22 JANUARY 2016

GLOBAL MARKETS

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The past week has been a very turbulent time for the markets, with many global benchmarks experiencing significant corrections, down over 10% since their previous highs. Although recovering somewhat towards the end of the week, year-to-date most markets are still in the red, the MSCI World Index being down 7.5% and the MSCI EM Index down 10.5%. While the start to the year has certainly been dominated by negative sentiment, the end of the week saw renewed hope following comments from the ECB suggesting further monetary easing and speculation over more stimulus out of China also playing a part. Nevertheless, 2016 remains set to be a bumpy ride. As participants square the likelihood of increased liquidity along with deteriorating fundamentals, there should be increasingly divergent views as to which way things will go. In line with the trend of deteriorating economic fundamentals, the IMF has added to concerns by cutting global growth forecasts for 2016 and 2017 to 3.4% and 3.6%, both years 0.2% lower than their previous forecasts. The largest downward revision was for Brazil, forecast to grow at -3.5% in 2016 and 0.0% in 2017, down from -1% and 2.3% respectively. Largely owing to the decline in oil prices, Saudi growth was cut 1% to 1.2% and 1.9% for 2016 and 2017 and the US was also revised to 2.5% for 2016 (down from 2.7%). One bright spot in the IMF’s forecast was India, forecast to grow at 7.5% this year. Expectation for growth in China remained unchanged at 6.3% for 2016. The rally in some markets towards the end of the week was sparked by ECB President Draghi announcing that due to updated macroeconomic projections, their monetary policy stance was under review and would possibly be reconsidered. Up until now, most market participants were only expecting further easing to occur in June but Draghi has all but assured that the ECB will take action in March. It seems the ECB is prepared to stimulate the region at all costs, fighting any headwinds the global econo-my may bring. Oil also recovered over the week after reaching a low of USD27/bbl. However with oversupply dominating market fundamentals, oil is likely to remain under pressure for the near term. Even though production outside of OPEC is projected to drop by around 600k barrels of oil per day, Iran is expected to add 500k barrels per day now that sanctions have been lifted. In addition, demand is expected to decline due to the slowing Chinese economy and a stronger USD.

MOST MARKETS STILL IN THE RED

Brenthurst Wealth Management (PTY) LTD FSP No. 7833

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In their updated World Economic Outlook, the IMF cut South African growth forecasts for the next two years to 0.7% for 2016 (from 1.3%) and to 1.8% for 2017 (from 2.1%). In line with most major economic institu-tions, the IMF is of the opinion that emerging markets face near term headwinds, in particular those exposed to commodity prices and higher borrowing costs. South Africa remains in a dilemma, with rising inflationary pressures prompting further interest rate hikes in a struggling economy which cannot bear the increased costs associated with this. S&P ratings agency also commentated on South Africa, stating that the country is on the verge of a ratings downgrade should any “policy mistakes” materialise. The comments come on the back of the dismissal of former Finance Minister Nene coupled with slow growth and a bleak macroeconomic outlook. All eyes will be on the budget statement in February for any signs of improved fiscal discipline. December CPI came in as expected with both headline and core inflation printing at 5.2% y/y, up from 4.8% and 5.1% respectively. Despite the considerable depreciation of the Rand since November last year, the pass-through effect does not seem to have yet been felt. For example, both clothing and vehicles saw little infla-tionary pressures. Food prices however (which contribute roughly 15% of the CPI basket) saw a material ac-celeration, rising 1% to 5.9% y/y. The risks to further inflationary pressures (both from the Rand and rising food prices) are therefore skewed to the upside, making it very difficult for the SARB not to react at their meeting on 28 January. The market is now pricing in 25 bps hike at the SARB meeting later this week. November retail sales were also released, rising 3.9% y/y, significantly stronger than expectations of 2.8% y/y. While a solid number, retail sales tend to be volatile and the print should therefore be viewed with caution when assessing the consumer environment. The average consumer’s disposable income has certainly benefited of late from the drop in oil prices; however rising interest rates and inflation should both put negative strain on real income. After a very poor start to the year, most local markets ended the week in positive teritory. Resources were among the top performers, the Resource 20 Index ending 3.8% higher. The JSE All Share Index and Top 40 Index were up 1.5% and 2.0% respectively.

DOMESTIC MARKETS

In China, the picture remains mixed. Fears of a slowdown continue to be at the forefront of investors’ minds but Tuesday saw a slight recovery in sentiment as China GDP numbers came in roughly in line with expectations. Q4 GDP numbers indicated the economy grew at 6.9% y/y, broadly in line with the 7% target China was aiming for. In addition, data indicated that housing prices were up 1.6% y/y in December, the third month of consecutive increas-es. Perhaps the monetary policy stimulus in the country is slowly starting to have an effect and the “hard landing” many are expecting may be slightly softer than originally thought.

ALL EYES ON THE BUDGET STATEMENT

Brenthurst Wealth Management (PTY) LTD FSP No. 7833

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This report was compiled in association with Counterpoint Asset Management.

DATE EVENT PERIOD SURVEY PRIOR SOUTH AFRICA

26-Jan Leading Indicator Nov 93.6

28-Jan PPI YoY Dec 4.90% 4.30%

28-Jan SARB Announce Interest Rate 28-Jan 6.75% 6.25%

29-Jan Money Supply M3 YoY Dec 9.75% 9.35%

29-Jan Private Sector Credit YoY Dec 9.83% 9.53%

29-Jan Trade Balance Rand Dec 4.8b 1.8b

29-Jan South Africa Budget Dec 29.70b -21.79b

UNITED STATES

26-Jan Consumer Confidence Index Jan 96.5 96.5

27-Jan New Home Sales Dec 500k 490k

27-Jan FOMC Rate Decision (Lower Bound) 27-Jan 0.25% 0.25%

27-Jan FOMC Rate Decision (Upper Bound) 27-Jan 0.50% 0.50%

28-Jan Durable Goods Orders Dec -0.50% 0.00%

29-Jan GDP Annualized QoQ 4Q 0.80% 2.00%

EURO AREA

28-Jan Economic Confidence Jan 106.4 106.8

28-Jan Business Climate Indicator Jan 0.4 0.41

28-Jan Consumer Confidence Jan -6.3 -6.3

29-Jan CPI Estimate YoY Jan 0.40% 0.20%

29-Jan CPI Core YoY Jan 0.90% 0.90%

JAPAN

25-Jan Trade Balance Dec JPY 100B JPY 379.7B

28-Jan Retail Sales YoY Dec 0.20% -1.00%

29-Jan Jobless Rate Dec 3.30% 3.30%

29-Jan Natl CPI YoY Dec 0.20% 0.30%

29-Jan BoJ Interest Rate Decision 29-Jan 0% 0%

29-Jan Bank of Japan Monetary Policy Statement

UPCOMING ECONOMIC EVENTS

WEEK AHEAD

Brenthurst Wealth Management (PTY) LTD FSP No. 7833

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WEEKLY TICKER

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CURRENCIES

Description Classification Currency

Exchange

Rate Week MTD YTD

ZAR/USD ZAR/USD ZAR 16.41 1.89% -5.75% -5.75%

ZAR/Pound ZAR/GBP ZAR 23.47 1.85% -2.85% -2.85%

ZAR/Euro ZAR/EUR ZAR 17.75 2.99% -5.26% -5.26%

Dollar/Euro** USD/EUR USD 1.08 -1.10% -0.41% -0.41%

Yen/Dollar YEN/USD YEN 118.64 -1.54% 1.33% 1.33%

COMMODITIES

Description Classification Currency Price Week MTD YTD

Gold Gold Spot USD 1101.65 0.83% 3.82% 3.82%

Brent Crude Oil ICE Brent Futures USD 32.62 11.20% -13.41% -13.41%

Platinum Platinum Spot USD 836.68 0.38% -6.15% -6.15%

Copper LME 3 month Copper USD 4443.00 2.59% -5.57% -5.57%

Silver Silver Spot USD 14.10 0.71% 1.85% 1.85%

Wheat Generic active future USD 475.75 0.37% 1.22% 1.22%

Yellow Maize Generic active future USD 370.25 1.93% 3.21% 3.21%

Soy Generic active future USD 876.25 -0.28% 0.57% 0.57%

GLOBAL EQUITY INDEXES

(TOTAL RETURN)

Description Index Currency Index Value Week MTD YTD

Global MSCI World* USD 1536.79 1.04% -7.51% -7.51%

United States S&P 500 USD 3568.90 1.43% -6.61% -6.61%

Europe Euro Stoxx 50 EUR 5763.59 2.40% -7.43% -7.43%

Britain FTSE 100 GBP 4625.36 1.69% -5.43% -5.43%

Germany DAX EUR 9764.88 2.30% -9.10% -9.10%

Japan Nikkei 225 JPY 25399.80 -1.10% -10.90% -10.90%

Emerging Markets MSCI Emerging Markets* USD 710.66 0.21% -10.48% -10.48%

SA EQUITY INDEXES

(TOTAL RETURN)

Description Index Currency Index Value Week MTD YTD

All Share JSE All Share ZAR 6403.95 1.51% -5.93% -5.93%

Top 40 JSE Top 40 ZAR 5769.42 2.01% -6.20% -6.20%

Shareholder Weighted JSE SWIX ZAR 16189.52 1.60% -7.02% -7.02%

Small Companies JSE Small Cap* ZAR 48417.61 -3.75% -8.68% -8.68%

Resources JSE Resource 20 ZAR 1433.25 3.79% -5.61% -5.61%

Industrials JSE Industrial 25 ZAR 12502.32 1.56% -5.06% -5.06%

Financials JSE Financial 15 ZAR 6883.00 1.69% -8.67% -8.67%

SA Listed Property JSE SA Listed Property ZAR 1763.10 -2.24% -7.62% -7.62%

Preference Shares JSE Pref Shares ZAR 1679.86 3.24% 4.30% 4.30%

SOUTH AFRICAN

FIXED INTEREST

Description Index Currency Index Value Week MTD YTD

All Bond BESA ALBI Index ZAR 1.01% 1.91% 1.91% 1.91%

Inflation Linked Bonds BESA CILI ZAR 0.14% 0.88% 0.88% 0.88%

Cash STEFI Composite* ZAR 0.13% 0.39% 0.13% 0.13%

Disclaimer: The document should not be seen as an offer to purchase any specific product and is not to be construed as advice or guidance in any form whatsoever. Investors are encouraged to obtain independent professional

investment advice before investing. Investors should be aware that investing in a financial product entails a level of risk which depends on the nature of the investment. The merits of any investment should be considered together with the investor’s specific risk profile and investment objectives. Past performance is not necessarily a guide to future performance. Fluctuations in exchange rates and underlying investments may cause the value of

international investments or underlying investments, if included in the mandate, to go up or down. Illustrations are not guaranteed but are for illustrative purposes only. Brenthurst Wealth is an Authorised Financial Service

Provider (FSP NO. 7833)

*Price Index (not Total Return) ** Negative indicates Euro weakness * * Negative indicates Euro weakness