|Bid||0.00 x 3000|
|Ask||0.00 x 2200|
|Day's Range||27.71 - 27.83|
|52 Week Range||26.38 - 28.21|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||0.41|
|Expense Ratio (net)||0.44%|
Yahoo Finance's Alexis Christoforous and Brian Cheung examine how inflation is already causing everyday items to be more expensive.
(Bloomberg) -- A new South African law bringing relief to over-indebted, lower-income consumers is unlikely to deal as severe a blow to banks and retailers that some investors may fear, according to Bank of America Merrill Lynch analysts.Describing the legislation as “a bogey, but no cause for alarm,” BofAML analysts including Michael Jacks said in a note that retailers have already provisioned for the projected impact on their bad debt. Banks would typically classify debt that qualifies under the new law under impairments, mitigating its effects. Legal challenges from creditors are likely, while the national credit body will need to add operating capacity, slowing its implementation.Retailers with higher proportions of customers using credit may feel the effects in slower growth, with the targeted income groups accounting for an average of 40% of shoppers at the Foschini Group Ltd., Truworths International Ltd., and Mr Price Group Ltd. A 5% debtors’ book write off would have a 2% negative earnings-per-share impact for Foschini and Truworths and 1% for Mr Price due to lost interest income, while damping future credit growth.“Credit accounts for 70% of Truworths Africa sales, 45% at Foschini and 18% at Mr Price,” BofAML said, adding that “both Foschini and Truworths have already made provisions for this bill in their provisions for bad debts in their last set of results.”Among banks, Capitec Bank Holdings Ltd. has the highest exposure to the targeted income group and one-time impairments could erase 13% of EPS and 4.7% of recurring profits. However, Capitec management has “been actively reducing exposure to affected loans and note conservative provisioning relative to write-off experience, which should temper this outcome.”Absa Group Ltd., the second-most exposed lender, could see a one-time blow to EPS of 9.8%, while FirstRand Ltd. could lose 8.6%, Standard Bank Group Ltd. 7.4% and Nedbank Group Ltd. 6.5%. As unsecured loans account for just 8% of total unsecured advances by banks and only 1% of total bank advances, the law is likely to have a muted impact on South African economic growth, they said.To contact the reporter on this story: Adelaide Changole in Nairobi at email@example.comTo contact the editors responsible for this story: Blaise Robinson at firstname.lastname@example.org, John Viljoen, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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The latest market sell-off that saw the Dow Jones Industrial Average lose over 1,300 points in two trading sessions caused investors to flee towards floating-rate bond ETFs and Treasury Inflation-Protected Securities (TIPS) as they dumped U.S. equities. While floating rate bond ETFs provide the necessary hedge against a rising rate environment, rising inflation can tamp down any returns realized from floating rate corporate bonds.
Rising interest rates have presented a challenge for passively-managed funds, which may exclude a significant portion of the investable debt market that could offer investors more diversification if they allocated capital into an actively-managed fund. For example, rising interest rates can hurt fixed-income investors who have capital allocated to debt with fixed rates that don't move with short-term rate adjustments made by the Federal Reserve. With no signs of slowing, it appears that a steady diet of rising rates is in order, according to Boston Federal Reserve President Eric Rosengren.
Fixed-income and inflation go hand-in-hand like termites to wood--inflation can erode the profits of fixed-income investments over time. Furthermore, the extended bull market has seen inflation on a steady, upward path with an increase of 2.9% for the 12 months ending July 2018, which is up from 1.9% since last August. "Inflation and fixed income are not a good combination usually," said George Rusnak, co-head of global fixed-income strategy at Wells Fargo.
For ETF investors, floating rate corporate bond ETFs provide the necessary hedge against a rising rate environment, but what are the options when inflation is rising in conjunction with the federal funds rate? Rising inflation can tamp down any returns realized from floating rate corporate bonds, but investors are keen to look at the IQ Real Return ETF (CPI) as an option to hedge against inflation. CPI seeks investment results that correspond to the IQ Real Return Index--a "fund of funds" that invests its net assets in the investments incorporated within the underlying index.