African markets outperforming emerging peers

In a column last week, I mentioned the significant outperformance of the S&P 500 index since 2010 compared with the MSCI emerging market index, this at a time when the economies of emerging markets are growing faster than those of developed countries.

Monday was another bearish one for emerging markets, with, for instance, Turkish stocks down by as much as 10% and Russia’s RTS index declining up to 2.1%.

The JSE’s all share index was down 2.48% on the stronger rand and the market playing follow-my-leader from a sell-off in the US on Friday — although US stock markets were rebounding by late Monday afternoon.

Standard Bank on Monday released a research report saying African currencies, bonds and equities remained relatively uncorrelated to other emerging markets, "potentially offering outperformance during the present profit-taking".

The report says that in the year to May this year, the MSCI African index was up 28.8%, the S&P 500 had climbed 18% over the same period, while the MSCI emerging markets index declined 3.7%

Standard says African currencies have performed better than expected against the strengthening dollar so far this year, and it is only the rand, Botswana pula and Mauritian rupee that have produced a negative return. "We expect a similar situation to materialise in the coming months, albeit we may see some short-term weakness, in line with global sentiment ."

A STORY flighted on SABC3 on Thursday night about the securitisation of South Africa’s mortgages by the banks prompted me to delve a little into the health of the local mortgage securitisation sector, a market not often covered by newspapers in this country.

Securitisation is the conversion of a pool of assets with a regular and predictable cash income such as mortgage repayments or credit card receivables into a security or marketable instrument.

It allows mostly the banks to "sell" a large number of its assets such as mortgage loans, which would otherwise not be attractive as individual purchases, to a specially formed company, which funds the purchase by issuing debt securities in the capital markets. It helps banks to improve their liquidity.

Other than the fact that I found out that these markets are relatively healthy, I discovered also that recent concerns among JSE investors about the exposure of some banks to high levels of unsecured lending may also affect the securitisation market.

For instance, Moody’s Investors Services senior analyst Anthony Parry says South Africa’s securitised mortgage market has a negative ratings outlook because of a number of macroeconomic factors. One such factor is unsecured debt, which "has grown significantly. We can’t separate that from the fact that consumers are already under pressure," he said.

Global rating agency Fitch said earlier this year that low economic growth and rising interest rates were not significant risk factors on the performance of mortgages, but "another downside risk ... would lie in a further, unexpected economic deterioration".

ON THE subjects of unsecured lending and property, cracks in the unsecured lending sector are as a result of an increase in bad debts and a slowdown in consumer household spending.

Gary Palmer, CEO of Paragon Lending Solutions, says the bank’s push into more profitable non-interest income was because of it not making sufficient earnings from traditional mortgage bonds. He argues that a decrease in interest rates and new lending regulations such as Basel 3 have pushed local banks into focusing on more profitable noninterest income, with increased involvement in the recovery process. This was why there had been a sharp decline in mortgage lending and a boom in unsecured credit.

Property investors may start finding it more difficult to obtain funding in the tighter economic environment, while commercial property owners will need to focus on rent collections from tenants, Mr Palmer says. But there remains big demand for income-generating properties, especially from blue-chip tenants.

The company developing tools that let people create stuff, today announced the official launch of Stitch -- the FREE iPhone app that takes a user's message, music and photos and puts it into motion. Saying "Good luck," "Happy birthday" or "Sorry I sold your cat" used to mean spending too much time online searching through old-school eCards. Users can now "Stitch" together slides with their images and music to create and share personalized messages at any time for any moment. The app is available exclusively in the Apple App Store.

"People want to create cool stuff and share it, and the products currently on the market don't allow us to get creative and personal," said Dustin Haisler, President of KlabLab. "Stitch was developed to give people the opportunity to convey the message they want to. Stitch isn't your grandma's greeting card."

Stitch fills the creativity void in the eCard space as the only mobile app that lets people design original content and put that content in motion. Templates act as guides, with popular subjects like Happy Birthday, I Love You and Thinking of You, while the blank template gives users total freedom to say exactly what is on their mind, whether that's wishing your son luck in the big game, saying hello to someone after a first date or asking mom to make her famous chocolate chip cookies.

Users can pull music directly from their iTunes library to customize the Stitch or select stock music within the app. Stiches can be further personalized by pulling images from the user's camera roll, Instagram's photo feed or Google Images. Text boxes can be inserted, sized and placed anywhere on the slides and users can also change the font color, size and justification. Stitchers can quickly render and share their completed Stitch on Facebook, Twitter, YouTube and through email and text, without ever connecting to Wi-Fi.Click on their website www.tilees.com for more information.