CFA South Africa Newsletter Sept
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CFA South Africa Monthly Newsletter for Chartered Financial Analysts Issue 6 September - October, 2010 University of Cape Town takes Top Honours at GIRC CFA South Africa (non-profit local society of CFA Institute) representing Chartered Financial Analysts has for a second year running, announced the University of Cape Town as the Global Investment Research Challenge (GIRC) winners for 2010. The GIRC is an educational initiative in which leading industry professionals guide students on how to research and report on a publicly traded company. This event spans over three months, and consisted of analyses of a public company while being mentored by a professional research analyst; writing a sell-side research report, and finally presenting the research results and recommendations to a high-profile panel of experts. Both the written report and the presentations From left: The University of Cape Town students; Tanya Hopker, Michail contribute to the overall score for a team. Marks Scholiadis, faculty advisor Francois Toerien, Emlyn Flint, Wasseem Hassen and for the presentations are awarded to teams based Jade Misplan took top honours at the local leg of Global Investment Research on their investment case, their poise, and their Challenge in Johannesburg for their analysis report on Vodacom. ability to answer the judges’ questions. The event is sponsored by CFA Institute as well as local CFA region. The winner of the EMEA regional competition proceeds to the global Institute member societies, of which the latter each finals that will be held on 8 April 2011 in Omaha, Nebraska, USA. host country heats of the Challenge. “The competition this year was fierce, with the participating teams The University of KwaZulu-Natal, University of elevating the standard from last year. All the teams participating were worthy Cape Town (UCT), University of Johannesburg (UJ), competitors. It is a great achievement by UCT to have won the local GIRC two University of Witwatersrand (Wits) and the years in a row. Last year, the team made it all the way to the finals, which University of Pretoria (UP) all participated in the demonstrates the virtues important for success in the investment profession: competition with UCT, UJ, Wits and UP reaching the ethics, analytics, rigour and tenacity. We wish them all the best going final to defend their individual reports and analysis forward,” said CFA South Africa President Elbie Louw, CFA on telecommunication company Vodacom to the panel of judges. The panel of judges for the 2010 local competition were Arthur Thompson (Past President of CFA South Africa and President Council UCT will, on 3 March 2011 represent South Representative for the EMEA East Region), Chris Gilmour (Absa Asset Africa at the Europe, Middle East, and Africa Management) and Peter Armitage (Investec). “As industry professionals with (EMEA) regional final of the GIRC in Madrid, Spain, years of experience, we were impressed by the students analytical ability and where the team of students will defend their report skill to sell their recommendations,” added Armitage. on Vodacom against the other finalists in the OTHER CFA PUBLICATIONS CFA Institute and Foundation for Governance Research and Education Launch Stewardship Project Task Force to Look at Role of Institutional Investors in Improving Corporate Governance CFA Institute, in conjunction with Professor John Mellor and the Foundation for Governance Research and Education (FGRE), announces the launch of a project to analyse any impediments to investors seeking to be more effective stewards in the area of corporate governance and responsible share ownership. With research being undertaken through the autumn, CFA Institute and FGRE expect to publish a report in March 2011 outlining findings and recommendations to address the issues. The project comes on the heels of a recent consultation and launch of the Stewardship Code from the United Kingdom’s Financial Reporting Council. CFA Institute and FGRE have established a task force of senior figures from the issuer, investment management, and trustee communities to steer the project. Contributors to this group, which met for the first time yesterday, will be added throughout the project. The current advisory group members are listed below: Charles Cronin, CFA, head, Standards and Financial Market Integrity EMEA, CFA Institute Professor John Mellor, founder and executive director, Foundation for Governance Research and Education Alan Brown, group chief investment officer, Schroders Carmine Di Noia, deputy director general, Head Capital Markets and Listed Companies, ASSONIME Will Goodhart, chief executive, CFA Society of the UK Howard Jacobs, trustee, Universities Superannuation Scheme David Pitt-Watson, chair, Hermes Focus Asset Management Ltd Co-Chairperson of the task force, Charles Cronin, CFA, head, EMEA, Standards and Financial Market Integrity at CFA Institute, said, “Following the financial crisis, many stakeholders around the world are seeking ways to improve corporate governance. The spotlight of attention is increasingly being focused on what the investment community can do to help promote better governance practices at firms in which they invest. Through this project, we are seeking to identify any significant impediments that impact an institutional investor’s ability to get involved and propose solutions to address them. The findings from the research will be a timely complement to initiatives such as the Stewardship Code for Institutional Investors launched by the Financial Reporting Council in the United Kingdom, as well as to inform discussions relating to the Green Paper on Corporate Governance issued by the European Commission, among other proposals.” Co-Chairperson, Professor John Mellor, executive director of FGRE, said, “I am delighted that this project has attracted such a breadth of senior interest from the issuer, institutional investors, and beneficiaries. This is testament to how serious these figures see the issue and their desire to understand and foster improvements in governance, and the concept of responsible ownership. The outputs from this project should help outline a greater understanding of the complexities surrounding stewardship under the prevailing joint stock owner model.” SOUTH AFRICA’S ECONOMY IS OPERATING UNDER CAPACITY Views from Speakers at the Annual CFA South Africa Conference In the recent World Competitiveness Report, South Africa was ranked 25th overall for the size of its economy, and 54th for its competitiveness. This, says Gordon Institute of Business Science (GIBS) Director Nick Binedell, is the wrong way round. A country’s competitiveness index should be ahead of its market size if it is to grow. Speaking at the recent annual not-for-profit professional society CFA South Africa (Chartered Financial Analysts) conference, Binedell said that, “In addition to strength of innovation and competitiveness in the private sector, it is clear that in emerging countries (dynamic markets) it is vital that the State provides effective and appropriate infrastructure. Such “…South Africa … has an inherited history of capacity to infrastructure should include education, technology produce champion multinational global companies and strong- willed entrepreneurs...” and other physical requirements such as road and rail,” he said. A particular example for competitive growth is Japan, which has gone from a smaller economy than The South African economy, he says, has a GDP in South Africa and has become one of the world’s excess of $300 billion and in a global economy of $50 biggest economies in fourteen years. trillion; South Africa remains a very small player – in fact less than half a percent of the world economy. The South Africa, on the other hand, has an inherited competitiveness indicators also show South Africa is history of capacity to produce champion multinational very highly ranked with regard to governance, auditing, global companies and strong-willed entrepreneurs but, security regulation and banking, and in fact scores currently, our map as businesspeople is incomplete. exceptionally highly for a country of our size (in the top We need to build a map that can increase our ten for these indicators) but ranks only 135th in Maths. economy as the country is currently operating below “It is unlikely that a country in a knowledge intensive, its potential. global economy can generate high levels of growth Eighty percent of future economic growth is set to without a highly skilled and educated workforce. come from dynamic markets and European, Japanese, Clearly we are going into battle without being and American interests are rebalancing as economics, adequately armed,” he says. and politics of the world is changing. “However, for "The low rankings South Africa achieved in the South Africa to take advantage of the changing areas of education and maths, once again puts the markets and become a leader, we must be literate and spotlight on the writing on the wall: to achieve educated to be able to find the opportunities. We sustainable economic growth in South Africa, we need must be connected to conflicts around us and to invest in our youth in a tangible consistent manner," understand them to know how to use it to our adds CFA South Africa President Elbie Louw, CFA. advantage.” CFA INSTITUTE DIGEST The Ultimate ‘Must Read List’ for All Financial Professionals Extreme Risk Analysis CFA Digest Nov 2010, Vol. 40, No. 4. Effective risk management requires identifying sources of risk and understanding