By Christo Luüs, Chairman, SAIFM

The terms “sub-investment grade” and “junk” status which recently featured so prominently due to South Africa’s sovereign risk downgrades, are often not well understood. The negative connotations associated with these terms make it important to consider calmly and objectively what these terms actually mean for an investor. These loaded terms are explored and clarified in this edition.

The growth of alternative financial markets outside the regulated financial markets, more particularly crowdfunding, has been strong in South Africa compared to the rest of the continent. The development of crowdfunding is explained while similarities with the South African phenomenon of stokvels are highlighted.

The question of why investors would choose to buy bonds with a negative interest rate effectively guaranteeing a loss to the holder is explored while trends in the property market and possible opportunities for astute investors are identified. The advisability or not of buying to rent and aspects that should be kept in mind when considering such an investment, are explored.

The King (IV) Report on Corporate Governance was launched in November 2016 and subsequently amendments to the JSE’s listings requirements were published with a view to incorporate certain provisions into the listings requirements. A comparison is provided of the material and practical aspects of the King III and King IV reports.

The King report’s relevance for the governance of retirement funds is also discussed.  The report includes a paradigm shift from short-term capital markets to long-term sustainable markets and has been extended to retirement funds by way of a sector supplement. The background to this extension and its applicability of these principles to Board of trustees are explained.

Capital gains tax, the continual bugbear for professionals in the financial markets, is explored with the warning that capital gains tax is payable on an accrual basis, whether the proceeds of the transaction has been received in cash or not.

We wish to thank all our contributors for sharing their insight and expertise thereby enhancing the professional development of financial market practitioners.