By Christo Luüs, Chairman, SAIFM

christoThe role of financial inclusion in the economic development of Sub-Saharan Africa is explored in this edition using the World Bank’s Global Findex database to compare financial inclusion in sub-Saharan Africa with the rest of the world. Aspects such as the use of mobile money, bank accounts and savings in banking institutions and semi-formal savings such as stokvels are analysed.

An important but controversial topic is whether the activities of investment managers pose systemic risk which could threaten financial stability. The areas of possible vulnerabilities are identified and the regulatory developments in this area highlighted.

The principles underlying the offence of insider trading and the definitions used in the legislation have been considered in the Pretoria High Court upon an application for review of a ruling of the Directorate of Market Abuse. This only happens rarely as these cases are typically resolved administratively. It is important for the financial markets industry to take note of the clarification provided in this case for understanding the offence properly.

The best and the worst performing shares over the period 2010 to 2015 are identified while the new JSE Eris Interest Rate Swap (IRS) Futures launched by the JSE is explained.

Something different in this edition is an analysis of the impact of leverage on market risk of companies listed on the Vietnam stock exchange.

What investors should do to avoid the pitfalls of misleading and fraudulent investment opportunities such as Ponzi schemes is explained. Equally important for any investor is to consider what will actually constitute your estate for estate duty purposes after your death.

Thank you to all contributors for sharing their insight thereby enhancing professionalism in our industry.

In this edition, the principles regarding effective risk data aggregation flowing from a consultative paper by the Basel Committee on Banking Supervision is briefly explained. There are 14 principles that must be complied with. However, not many clear metrics are offered to measure compliance against.

Still on the topic of Basel committee, it is argued that equity-like risks are brought to bonds under certain circumstances as a result of the Basel III requirement that bondholders share in the losses of a bank in times of stress.

The use of technology to facilitate the rapid convergence of wealth and capital markets is discussed while the application of technology to facilitate multi-channel engagement with clients is explained. It is argued that the correct use of technology provides the ability to scale and enhance customer relationships.

The adequacy of savings in retirement and the reasons why we don’t save enough is assessed i.e. it is due to certain behavioural characteristics. The tendency to sabotage our savings programme can only be countered if we use our own behavioural biases to our advantage.

In an analysis of long-term investment performance, the return and volatility characteristics of five South African asset classes namely equities, bonds, cash, gold and property were used to construct an efficient frontier, showing the minimum risk that could have been achieved at various returns by asset class diversification.

An overview of the collaboration initiatives between the Chinese and South African exchanges is provided. This is a trend that will continue to the benefit of financial market practitioners in both countries.

It is important for taxpayers to realise what their duties are with regard to arrangements that must under the tax law be reported to prevent becoming guilty of impermissible tax avoidance. These duties are explained in some detail.

Thank you to all our contributors who made this edition of the magazine so stimulating.