Markets: Corona wreaks havoc
The Overall Index of the NSX ended Monday at 892.91 points, the lowest since the 771.41 points recorded in 2016.
Jo-Maré Duddy – The Government Institutions Pension Fund (GIPF) yesterday rushed to ensure its more than 100 000 members that their investments are safe.
“As a long-term investor, GIPF will not make any rushed investment decisions in light of this [corona]virus,” the fund’s chief executive officer, David Nuyoma, said in a statement.
Nuyoma’s reassurance comes a day after the Overall Index of the Namibian Stock Exchange (NSX) dropped to its lowest level since 2016, while the Local Index closed at its lowest point since 2017.
The NSX followed the JSE and global stock exchanges which was rocked by concerns about the economic fallout of Covid-19.
The JSE fell below 38 784 points on Monday, its lowest level since August 2013.
NSX
The Overall Index of the NSX ended Monday at 892.91 points, the lowest since the 771.41 points recorded in 2016. The Local Index closed at 586.22. The last time the Local Index ended on such a low note was in 2017 when it closed at 546.90 points.
The Local Index was down 27.65 points or 4.5% from the 613.87 points it ended last year, while the Overall Index lost 413.39 points or nearly 31.7%.
At the end of business on Monday afternoon, the Local Index’s market capitalisation by total shares in issue stood at about N$36.3 billion. This is some N$1.7 billion or nearly 4.8% lower than the end of 2019.
‘Extreme impact’
Capricorn Asset Management (CAM), the investment arm of locally-listed Capricorn Investment Group, yesterday also reacted to the market volatility.
“The coronavirus outbreak is having an extreme impact on the global financial markets. The real cost to the actual economies is still unknown, and the future effects cannot be accurately determined as the situation is still developing,” said CAM managing director, Tertius Liebenberg.
The outbreak of the coronavirus, as well as some other recent geopolitical tensions, have caused a significant sell-off in global financial instruments and particularly all equities, Liebenberg said.
“Therefore, a reduction in the market value of client portfolios that have exposure to non-cash instruments (e.g. property, bonds and equities) can be seen.”
Civil servants
At the end of March 2019, the GIPF managed assets worth about N$118.1 billion.
Nuyoma yesterday said the GIPF “has taken cognisance of the threat and significant market volatility caused by the coronavirus”.
The fund has put aside adequate assets and risk reserves totalling some N$25.9 billion to ensure that the liabilities are not understated. The GIPF will therefore be able to pay the promised benefits as they fall due, Nuyoma said.
“These reserves provide the necessary cushion in times such as these,” he said.
Nuyoma added: “The diversified nature of our investments and income streams in terms of asset allocation is another risk mitigating measure the fund has in place.”
‘Liability-driven strategy’
The GIPF has a liability-driven strategy that is comprised of a “robust asset liability modelling (ALM) process”, he said.
The ALM feeds into the risk and return parameters known as the strategic asset allocation (SAA), which GIPF as a long-term investor uses to implement its investment philosophy, he added.
“The ALM process allows the fund to adapt to prevailing economic market conditions, relative to its liabilities, and factors in variables that will ensure that GIPF does not only safe-guard the assets of the fund, but also grow them through investing in return-seeking investment opportunities,” Nuyoma said.
Regarding currency movements, the board of the GIPF has proactively taken protective measures such as currency hedges, he said.
The GIPF continues to monitor the markets and will take any other necessary mitigating actions as and when it becomes necessary, Nuyoma said.
Speculation
Liebenberg said just as the current crash was impossible to forecast, in the same way, the time and magnitude of the correction - if any - is just as uncertain.
“However, the greatest mistake an investor can make now is to switch out based on fear as it would result in the realisation of book losses thus far incurred,” he said.
Investors should consider their investment horizons and investment goals before making any short-term decisions, Liebenberg said. Care should be taken not to make a short-term decision on a long-term asset.
“While equity exposure is the source of the decrease in market value, it is only equity exposure that can repair the damage in the shortest timeframe,” Liebenberg said.
CAM recommends that investors consider their long-term investment goals and strategic allocation before making any changes to their portfolios.
“Volatility in the markets are high and shall remain high until the virus has stopped spreading, only after that would it be possible to evaluate if the current market prices reflect the intrinsic values of the assets they represent,” Liebenberg said.
“We strongly discourage any form of speculation on the market – now and always.”
“As a long-term investor, GIPF will not make any rushed investment decisions in light of this [corona]virus,” the fund’s chief executive officer, David Nuyoma, said in a statement.
Nuyoma’s reassurance comes a day after the Overall Index of the Namibian Stock Exchange (NSX) dropped to its lowest level since 2016, while the Local Index closed at its lowest point since 2017.
The NSX followed the JSE and global stock exchanges which was rocked by concerns about the economic fallout of Covid-19.
The JSE fell below 38 784 points on Monday, its lowest level since August 2013.
NSX
The Overall Index of the NSX ended Monday at 892.91 points, the lowest since the 771.41 points recorded in 2016. The Local Index closed at 586.22. The last time the Local Index ended on such a low note was in 2017 when it closed at 546.90 points.
The Local Index was down 27.65 points or 4.5% from the 613.87 points it ended last year, while the Overall Index lost 413.39 points or nearly 31.7%.
At the end of business on Monday afternoon, the Local Index’s market capitalisation by total shares in issue stood at about N$36.3 billion. This is some N$1.7 billion or nearly 4.8% lower than the end of 2019.
‘Extreme impact’
Capricorn Asset Management (CAM), the investment arm of locally-listed Capricorn Investment Group, yesterday also reacted to the market volatility.
“The coronavirus outbreak is having an extreme impact on the global financial markets. The real cost to the actual economies is still unknown, and the future effects cannot be accurately determined as the situation is still developing,” said CAM managing director, Tertius Liebenberg.
The outbreak of the coronavirus, as well as some other recent geopolitical tensions, have caused a significant sell-off in global financial instruments and particularly all equities, Liebenberg said.
“Therefore, a reduction in the market value of client portfolios that have exposure to non-cash instruments (e.g. property, bonds and equities) can be seen.”
Civil servants
At the end of March 2019, the GIPF managed assets worth about N$118.1 billion.
Nuyoma yesterday said the GIPF “has taken cognisance of the threat and significant market volatility caused by the coronavirus”.
The fund has put aside adequate assets and risk reserves totalling some N$25.9 billion to ensure that the liabilities are not understated. The GIPF will therefore be able to pay the promised benefits as they fall due, Nuyoma said.
“These reserves provide the necessary cushion in times such as these,” he said.
Nuyoma added: “The diversified nature of our investments and income streams in terms of asset allocation is another risk mitigating measure the fund has in place.”
‘Liability-driven strategy’
The GIPF has a liability-driven strategy that is comprised of a “robust asset liability modelling (ALM) process”, he said.
The ALM feeds into the risk and return parameters known as the strategic asset allocation (SAA), which GIPF as a long-term investor uses to implement its investment philosophy, he added.
“The ALM process allows the fund to adapt to prevailing economic market conditions, relative to its liabilities, and factors in variables that will ensure that GIPF does not only safe-guard the assets of the fund, but also grow them through investing in return-seeking investment opportunities,” Nuyoma said.
Regarding currency movements, the board of the GIPF has proactively taken protective measures such as currency hedges, he said.
The GIPF continues to monitor the markets and will take any other necessary mitigating actions as and when it becomes necessary, Nuyoma said.
Speculation
Liebenberg said just as the current crash was impossible to forecast, in the same way, the time and magnitude of the correction - if any - is just as uncertain.
“However, the greatest mistake an investor can make now is to switch out based on fear as it would result in the realisation of book losses thus far incurred,” he said.
Investors should consider their investment horizons and investment goals before making any short-term decisions, Liebenberg said. Care should be taken not to make a short-term decision on a long-term asset.
“While equity exposure is the source of the decrease in market value, it is only equity exposure that can repair the damage in the shortest timeframe,” Liebenberg said.
CAM recommends that investors consider their long-term investment goals and strategic allocation before making any changes to their portfolios.
“Volatility in the markets are high and shall remain high until the virus has stopped spreading, only after that would it be possible to evaluate if the current market prices reflect the intrinsic values of the assets they represent,” Liebenberg said.
“We strongly discourage any form of speculation on the market – now and always.”
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