3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item The financialization of the South African economy and its implications for employment(2015-02-02) Mvelase, Mncedisi SiphosethuAfter 20 years in existence democratic South Africa is at the crossroads while people lives have changed significantly after 1994, the country has faced increasing levels of unemployment and inequality. Drawing from the Keynesian theory of employment and recent financialization literature, this paper looks at the trends in financial income as a share of profits in the mining sector and how this has affected real investment in the sector and linking with the theory we look at how his behaviour has contributed to the employment levels in the sector. This retrospective look at the mining sector is done in order to pick trends that might give us better insight for policy interventions in the sector in order to create employment opportunities for the population going forwardItem The introduction of REITs to the South African property market: Opportunities for fund managers(2014-07-29) Naidoo, HannalishaOn 1 May 2013, real estate investment trusts (REITs), a listed property product, had legislation about it introduced in the South African property market. Prior to the introduction of this REIT legislation, property unit trusts (PUTs) and property loan stocks (PLSs) were the two predominant types of listed property investment products in South Africa. However, both the PUT and PLS are subject to uneven regulation and taxation, and they lack flexibility. The REIT legislation was introduced to eliminate some of the problems of the PUTs and PLSs, by creating: a more unified tax treatment of listed property companies, more stringent regulatory requirements and uplifting the South African property market to a level that is internationally competitive. It is therefore considered valuable to empirically investigate whether or not the introduction of the REIT framework into the listed South African property market will be advantageous to investors, and whether or not it would lead to improvement in the efficiency, regulation and taxation of the listed property market. A questionnaire was used to collect primary data to analyze the research problem. The questionnaire used a Likert scale format that consisted of 20 questions. There were a total of 58 useable respondents, each of who fell into 1 of 5 occupational categories. The questions were divided into 4 unifying themes and the findings were analyzed according to these themes. From the analysis of the responses it was found that the REIT legislation is perceived as a welcomed and suitable introduction to the South African listed property market. We could also infer that REITs allow for a more favorable tax dispensation, improved regulation, increased international competitiveness and enhanced liquidity within the listed property market. Overall, there is a perception that investors, especially fund managers, would find it potentially advantageous to include South African REITs or a higher proportion of such REITs in their investment portfolios.Item Performance evaluation of unit trusts in South Africa over the last two decades(2013-08-02) Mibiola, Oluwole JacobUnit trust investment looks cosy and attractive from the surface, but a detailed understanding of unit trust and its performance can be daunting. Having discussed the evolution of mutual funds in the US and other industrial and financially sound countries; it is concerning that not much has been done in terms of research works on the South Africa unit trust industry’s performance. Several studies have been aimed at investigating the investment in mutual funds relative to mutual fund returns, but an extensive study on the performance of active unit trusts against their bench-marking index is still lacking. This study contributes to the debate by conducting a detailed study of the performances of mutual funds in the last two decades and also what the global investment fund witnessed over this period, with particular interest in the South African market. Another contribution of this study was to provide reasons for the slow growth of investment funds in South Africa; this study attempts to ascribe reasons as to why this has been so. This study used three different performance measures (namely: the nominal returns, Sharpe Ratios and CAPM Alphas) to test the possibility of superior performance by the market or the funds. In order to carry out this detailed analysis of the performance of unit trusts, these performance tests were applied individually to the net returns obtained from a sample of 64 South African domestic general equity unit trusts, covering the 20-year period from January 1st 1992 to December 31st 2011. This 20-year period was further divided into 7 different periods of four 5-year periods, two 10-year periods and the whole 20-year period. This was done to avoid survivorship bias. In all of the periods, strong evidence of superior performance by the domestic general equity unit trust over the market could not be found. Furthermore, several reasons were deduced form the study as to investment funds continue to experience slow growth. Some of the reasons include the following: cost of index fund, investor’s sentiments, and commissions amongst others. Finally, having said all these, outperformance, perhaps may not be the main objective of unit trusts. The findings of this study may not have provided strong evidence of outperformance, it however reveal that there is a need for unit trusts to evaluate the costs and benefits involved in their trading activities in order to provide investors with maximum possible returns for the level of risk they take.Item Evaluation of gold as an investment asset: the South African context(2013-07-26) Pule, Barrend PuleThis study examines potential benefits of investing in various gold investment vehicles in terms of risk and return from a typical South African investor’s perspective. Furthermore, the study examines the relationship between gold price and South African macroeconomic variables. Data used in the study comprises of monthly closing share price data of JSE listed gold mining companies, gold price, Krugerrand coin, NewGold ETF, FTSE/JSE all share index, gold mining index, unit trust index (gold & precious metals), real GDP, rand/dollar exchange rate, repo rate and CPI. It was found that gold bullion produced superior abnormal returns and yielded greater capital growth compared to the JSE all share index. However, the JSE all share index exhibit lower volatility compared to gold bullion. Abnormal returns for JSE listed gold mining companies tend to differ substantially from gold bullion abnormal returns. Gold mining companies exhibit added risk which cannot be attributed to the gold bullion. Gold has a potential to reduce systematic risk when added to a portfolio of stocks. A multiple regression model was estimated which relates gold price to South African macroeconomic variables. It was found that gold price depends on real GDP and rand/dollar exchange rate.Item Valuation of emerging market companies and the role of company risk(2013-03-20) Nkala, DumisaniEmerging markets have become important investment destination for international investors as they seek opportunities to grow and diversify their investment portfolios. At the same time, emerging markets are perceived to be riskier than developed markets. It is therefore imperative for the international investor to fully comprehend and appreciate the risk faced by their investments in the emerging markets and the drivers of the underlying their value. A significant amount of research has been carried out on the valuation of companies in emerging markets and the role country risk has in determining the final valuation price. Despite this, there is still no consensus amongst practitioners in the financial industry and academics on the best approach. The valuation methodologies currently employed vary significantly and in some cases involve making arbitrary adjustments based on “gut feel” with limited empirical evidence. This research study appraises existing emerging markets valuation frameworks such as the discounted cash flow model (DCF), including capital asset pricing model (CAPM) and its variants. It also looks at relative valuation and real option pricing framework with intention of proposing the “best practice” valuation framework for valuing companies in emerging markets. The general theory is that emerging markets are segmented from the developed world capital markets making portfolio optimisation across these markets difficult. Segmentation of emerging markets is as a result of inefficiency of the capital markets, in particular the inability of foreign investors to enter and exit the local capital markets at no extra costs. The emerging markets valuation frameworks are designed to address the inability to effectively diversify investments due to the segmentation of these markets. It was therefore pertinent that this study determines whether emerging markets are indeed segmented from world capital markets and therefore significantly riskier than developed markets. This part of the study was carried out by conducting both quantitative and qualitative analysis of the emerging capital markets. Quantitative analysis was done on the performances of twenty-seven emerging equity markets for the period between July 1998 and November 2008 and the results were compared with the US equity market analysis (United States was used in the study as the proxy for the world equity market) for the same period. The study used volatility of the markets as the measure of risk and the correlation to measure the level of integration. Qualitative analysis involved reviewing regulatory, legal and political risks of the different emerging markets. The results from this part of the study showed that emerging markets are indeed riskier than developed markets and are somewhat segmented from the world capital markets. Based on 4 this result, we concluded that the valuation frameworks in emerging markets should be adjusted or modified to incorporate the impact of country risk. A total of eleven different emerging markets valuation frameworks were appraised. The study reviewed the literature relating to the emerging markets valuation frameworks to establish their theoretical and empirical basis. The study also conducted qualitative and quantitative analysis of each of the eleven selected methods regarding relevance and practicality in the valuation of emerging market companies. Valuation models were developed from the different valuation frameworks, a process that included deriving different variants of the models such as the country risk premium. The qualitative analysis looked at the how practical is the valuation frameworks considering its variants. For quantitative analysis the emerging market valuation models were used to value ABSA Bank Group; Edgars Consolidated Stores Limited; and Standard Bank Group and outcomes of the valuation were compared with the final purchase price paid in recent corporate transactions involving these companies. The absolute difference between the notional valuation and the actual transaction price was used to rank the valuation frameworks, with smallest difference indicating the best fit. All the eleven emerging market valuation methodologies yielded results different from the purchase prices. Erb−Harvey−Viskanta (EHV) model had the best fit when compared with the actual purchase price. However, the study does not propose the usage of EHV as the “best practice” method because of weak theoretical basis. The study concludes that at least three to four methodologies should be used to derive a valuation range for purchase price negotiations