INTRODUCTION
Welcome to the first Warwick Private Wealth Bulletin. The objective of the Bulletin is to give our clients and readers every quarter a short but clear picture of the "Private Wealth Management" world, as well as explain some of the things Warwick has been doing in the previous quarter.
Warwick are Private Wealth Managers and are absolutely aware that wealth means very different things to everyone. In fact a client's wealth is a factor of their physical, mental and financial health. It concerns a clients happiness in relation to their family and friends and the term wealth can cover over a hundred factors that make up a persons life. All our clients are wealthy in their own unique way, we are not in the business of being "exclusionary" we are inclusive people who offer an exclusive style of service and attention. Warwick can in fact be described as offering "Inclusive Exclusivity".
It has been another highly successful quarter for the markets, both in South Africa and internationally. Warwick Private Wealth Management clients have benefited from this across the board. Bespoke Portfolios are performing well as are the Warwick Retirement Consolidator portfolios. Our Private Banking Services clients have enjoyed even better rates on their cash and our Estates and Executorship business has grown as the word has been passed to the referrals we have received, about the quality of our service.
Warwick in South Africa has now firmly established itself as a leading Private Wealth Management operation and its new branding and additional service levels are complete as we enter the second half of 2007.
We hope you enjoy the following sections on our services, the local and international markets, opportunity, compliance, News and Events.
SERVICES
There are three distinct areas where Warwick can assist the Private Wealth Management Client, and over the past six months the fact that we have seen other firms imitate and replicate our style, products and marketing tells us that "Imitation is the highest form of flattery" and that we must be getting things right. The three pillars to our offering are:
Bespoke Investment Services
Portfolio Management
Bespoke individual stock portfolios for the clients voluntary monies
Warwick Retirement Consolidator
Bespoke individual stock portfolios for the clients compulsory monies (RA, pension funds, provident funds)
Private Banking Services
HICA (High Interest Call Accounts)
Fixed Deposits
Scheduled Payments (standing orders)
Estate and Executor Services
Wills
New or updated to suit the client
Trusts
Formed where necessary to suit the client
Executorship
Available to all Warwick clients
Warwick NEVER takes client funds onto their balance sheet but utilize third parties to act as the regulated deposit taking institutions, which gives certainty and peace of mind. The institutions utilized by Warwick include Investec Securities, Investec Bank, BOE Securities, Nedbank, BJM and Momentum.
LOCAL MARKETS
Investors in SA equities have enjoyed a good year to date, with the All Share Index rising by 16.2% to the end of May. By contrast the All Bond only gained 2% and cash returned 3.9%. Foreign buyers have been adding on average close to R10 billion a month to the equity market, attracted by strong economic and earnings growth and a relatively stable rand, in an environment of conservative monetary and fiscal policy.
However, as part of the world economy SA financial markets are not insulated from exogenous shocks. In fact market contagion is amplified once it reaches "riskier" asset classes, including emerging markets. SA is no exception and therefore felt the end February global sell-off more than developed markets. Since then, emerging markets and SA have reasserted themselves and have resumed their out-performance of the US dollar based MSCI index.
As described in the last quarterly bulletin, the SA economy has basked in a "sweet spot" for much of the past year with a combination of rapid economic growth (which averaged at 5.6 % in 2006), subdued inflation, and accommodative interest rates. This outlook was however derailed to some extent in early June by a raft of poor macro-economic data.
The interest rate outlook deteriorated rapidly following the release of far worse than expected inflation data. April's consumer price inflation rate (CPIX) leapt to 6.3%, breaching the upper 6% target range just a month after the SARB announced it expected consumer price inflation to peak below it. The producer price inflation (PPI) was also sharply higher at 11.1%, up from 10.3% in March and significantly higher than the consensus forecast of 10.4%. The surge resulted from a broad based increase across most sectors which is a concern. Private sector credit extension (PSCE) and M3 broad money supply also accelerated sharply.
This data dented investor confidence and led the SA Reserve Bank to lift the repo rate by 50 basis points to 9.5%. Fortunately however, this is likely to be very close to the peak in local interest rates if not the last hike in this cycle. Much of the month-on month rise in April's CPIX of 1.2% for instance can be attributed to transportation (0.6%) and a sizeable portion to food prices (0.4%), rather than pressure from consumer spending. Equally the month-on-month PPI reading included a decline in food prices, which should reflect in better consumer price inflation in the months ahead. The acceleration in credit extension meanwhile is more due to corporate lending than consumer credit growth, as evidenced by slowing passenger vehicle sales, and as such should ultimately be disinflationary.
Inflation is a lagging indicator, and tends to follow a bumpy path in adjusting to monetary tightening. On this basis and after closer inspection of recently deteriorating data, it is unlikely the repo rate will be raised beyond 10%. In addition, the local economy is slowing slightly to a 4.7% quarter-on-quarter annualized rate in the first quarter, below the consensus forecast for 4.9% growth and the 5.6% growth achieved in the fourth quarter 06. More importantly, analysis of the "growth mix" suggests signs of a slowdown in consumer spending, while very strong growth in construction suggests a healthy increase in GFCF (gross fixed capital formation), considered non-inflationary. Although a slower rate of growth, it is healthy nonetheless and should re-accelerate provided the IMF
