Investec Euro Stoxx50 Digital Plus Presentation October 2018
Investec Euro Stoxx50 Digital Plus A 3.5-year equity investment linked to the 100% downside protected at The ESP is a listed instrument on performance of the Euro Stoxx50 Index. maturity in ZAR provided the Index the JSE and can be purchased via a does not end down more than 40%. stockbroking account using Rand. The return will be paid to the investor in Rand therefore no currency risk. The Digital Plus ESP is a credit Minimum investment amount is from linked ESP where the investor takes R50 000 cash and increments of Earn a minimum 70% digital return in credit risk on both Investec Bank R10 000. ZAR if the Index is flat or positive at Limited (“IBL”) and Standard Bank maturity, plus unlimited upside above Daily liquidity in normal market of SA (“SBK”) . 70%. conditions. Investec makes an IBL is the product supplier, liquidity active daily market in the investment Reference Index: Euro Stoxx50 (SX5E provider, issuer and market maker. on the JSE with a bid to mid-spread Index). of 1%. JSE code: SPIB29. 2
What is the pay-off profile at expiry in Rand? Return Uncapped 200% 190% 180% 170% 70% Digital Return 160% 150% 140% 130% 120% EuroStoxx50 Index 110% 100% 40% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200% 90% 80% 70% 60% 50% 40% 3
What returns can investors expect? Index returns at maturity* Initial Rand amount invested Digital Plus ESP investment value at maturity 78% R100 000 R178 000 27% R100 000 R170 000 12% R100 000 R170 000 -21% R100 000 R100 000 -42% R100 000 R58 000 * Theoretical returns for illustrative purposes 4
Euro Stoxx50 commentary • The Euro Area is the second largest economy in the EU GDP annual growth rate world. • Of the 19 member states it includes, the biggest are: 4 Germany (29% of GDP, France (20%), Italy (15%) 2 and Spain (10%). • On the expenditure side, household consumption is 0 the main component of GDP and accounts for 54% of its total use, followed by gross fixed capital -2 formation (21%) and government expenditure (20%). • Exports of goods and services account for 47 -4 percent of GDP while imports account for 43 percent, adding 4 percent of total GDP. -6 • The European Central Bank has called an end to its 2008 2010 2012 2014 2016 2018 quantitative easing programme by the end of 2018, showing confidence in the Eurozone economy Source: Tradingeconomics.com | Eurostat • Per the Graph below the GDP annual growth rate has recovered to over 2% per annum after the dual shock of both the financial and Greek crisis. 5
Euro Stoxx50 returns 2000-2018 Data source: Bloomberg 6
Euro Stoxx50 country exposure As of 4 Sep 2018 (%) Country Weights % 38,05% France 31,85% Germany 8,92% Netherlands 8,68% Spain 4,51% Italy 3,2% United Kingdom 2,6% Belgium 1,16% Finland 1,03% Data source: Stoxx Ireland 7
Euro Stoxx50 Top 10 companies As of 4 Sep 2018 (%) Name ISIN Weight TOTAL ORD FR0000120271 6.15% SAP SE ORD DE0007164600 4.78% SIEMENS ORD DE0007236101 4.04% SANOFI-AVENTIS ORD FR0000120578 3.60% LVMH MOET HENNESSY LOUIS VUITT FR0000121014 3.48% ALLIANZ SE ORD DE0008404005 3.47% ASML HOLDING ORD NL0010273215 3.27% UNILEVER NV NL0000009355 3.20% BAYER AG DE000BAY0017 3.20% BASF SE ORD DE000BASF111 3.12% Data source: Bloomberg 8
Euro Stoxx50 industry sector weightings As of 4 Sep 2018 (%) Sector Weights % 18,90% Financials 14,12% Industrials 11,66% Consumer discretionary 10,94% Consumer staples 10,65% Healthcare 9,2% Information technology 7,9% Energy 6,15% Materials 4,88% Utilities Other 5,60% Data source: Stoxx 9
How would the Digital Plus have performed in the past? 3,603 rolling 3.5 year periods for the past Distribution of Returns 14 years 60.00% • Digital would have triggered 59.12% historically 50.03% 50.00% • Investors would have received 70% return in 38.93% 40.00% 50.03% of the time • Investors would have received more than 70% 30.00% return in 9.09% of the time 20.00% • Capital returned 38.93% of the time 9.09% 10.00% 1.89% • Capital losses would have been incurred in 0.00% 1.89% of the time and only in the 2008 Financial Negative returns Returned Capital 70% Digital Greater than 70% crisis Data source: Bloomberg 10
Euro Stoxx50 performance vs. Digital Plus performance 3063 rolling 3.5 year periods from 2004 to date have been tested 3.5yr rolling returns 5000 150.00% 4500 4000 100.00% 3500 3000 50.00% 2500 2000 0.00% 1500 1000 -50.00% 500 0 -100.00% Eurostoxx50 Digital Returns Data source: Bloomberg 11
What dividends am I forfeiting by investing in this product as opposed to the Index? Sygnia Euro Stoxx50 tracker Current 12m Dividend Yield 2.18% Less 20% tax 0.55% Net Dividend 1.74% Compounded for 3.5 years 7.23% • Dividend yield of the Sygnia Euro • Net dividend forfeiture is 7.23% over the 3.5 years • ETF trackers provide no capital protection, • Where the the Digital Plus, offers geared upside and capital protection Data source: Bloomberg 12
What tax will investors pay? • The information provided in this brochure is general information and should not be construed as tax advice. Taxation legislation and its interpretation may change. For as long as an investor is the holder of an ESP, they will be the owner of ETFs. Section 9C of the Act deems receipts and accruals arising from the disposal of ETFs to be of a capital nature if the taxpayer was the owner of the equity share for a continuous period of at least 3 years immediately prior to the sale. • The tax consequences for investors who elect to sell their ETFs before a period of 3 years has elapsed will be dependent upon individual circumstances and any profit realised from the sale may be subject to Income Tax/CGT. • It is recommended that prospective investors seek independent professional legal, tax and accounting advice and consider the investment in the light of the Investor’s particular circumstances. No responsibility is accepted by IBL for the treatment of any court of law, tax, banking or other authority in any jurisdiction of the investment and no undertaking, warranty or representation is given with regard to the outcome of any such investment. • All opinions, statements and analysis expressed are based on information, which was current at the time of writing and from sources, which ISP believes to be authentic and reliable. 13
What fees are included? • All distribution fees, including JSE listing costs and licensing costs, have been priced into the product and will not affect the investor’s return. • That is, investors will receive back R170 for each R100 they invest should the index be flat or slightly positive. • A distribution fee of 1.00% (inclusive of VAT) will be paid in year 1, 2 and 3 annually in advance to the Financial/Investment Professional. Important dates Trade date Closing date Listing date Maturity date 19 November 2018 29 November 2018 14 December 2018 31 May 2022 14
Financial Services Board (“FSB”) licence categories FSB Category 1 (“CAT1”) and Category 2 (“CAT2”) licence holders qualifying criteria to write structured products: • Listed products are exempt under the Financial Advisory and Intermediary Services Act (“FAIS”), however financial advisors/stockbrokers/wealth managers should be aware of their FAIS compliance responsibilities under the Johannesburg Stock Exchange(“JSE”) rules for listed products; • Where advice is being given, financial advisors/stockbrokers/wealth managers should ensure that they understand the underlying instruments and are able to provide advice on a "look through" basis; and • The onus is on the financial advisor/stockbroker/wealth manager to ensure that they have the appropriate license to advise on the Digital Plus CAT1 license holders CAT2 license holders 1.8 Securities and Instruments: Shares 2.5 Securities and instruments: Shares 1.11 Securities and instruments: warrants, certificates 2.8 Securities and instruments: warrants, certificates and other instruments acknowledging, conferring and other instruments acknowledging, conferring or creating rights to subscribe to acquire, dispose or creating rights to subscribe to acquire, dispose of or convert securities and instruments referred of or convert securities and instruments referred to in subcategories 1.8, 1.9 and 1.10 to in subcategories 2.5, 2.6 and 2.7 above 1.13 Securities and instruments: Derivative 2.10 Securities and instruments: Derivative instruments excluding warrants instruments excluding warrants 1.14 Participatory interests in CIS’s (Collective 2.11 Participatory interests in CIS’s (Collective Investment Schemes) Investment Schemes) 15
Contact us Please contact one of our product specialists for further information Brian McMillan +27 11 291 3180 brian.mcmillan@investec.co.za Japie Lubbe +27 21 416 3307 japie.lubbe@investec.co.za Carlo Accolla +27 21 416 3316 carlo.accolla@investec.co.za Andri Joubert +27 21 416 3679 andri.joubert@investec.co.za Recent accolades Africa Structured Products & Derivatives Awards 2017 Best performance in South Africa 2016 & 2017 Best distributor in South Africa 2016 & 2017 Best House Africa 2017 Deal of the Year 2017 16
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