A good year all round

Paul Hansen at Stanlib says that the local markets showed good returns with the conservative property sector the big winner last year. There are no more juicy returns left here but it is still attractive relative to other asset classes.

The sector returns winner was resources. The commodity boom is better than expected. Supply is constrained with gold production is sitting at 1930 levels. Jewelry demand is outstripping gold supply, with gold no longer acting as the anti-dollar currency and precious metals prices are consistently higher than forecast.

He predicts gold at $600 and platinum at $1100.

There will be some profit taking, as was evidenced in mid January, says Hansen. This is to be expected. The SA equity market can be brought into correction, although the countrys growth is still solid and earnings are growing steadily.

He says that local financial and industrial shares are yielding almost the same as the 10-year SA government bonds rates. This is a powerful story. While bond yields might increase slightly if there isnt a prime interest rate cut in February.

The JSEs financial and industrial shares remain undervalued relative to bonds and cash says Hansen, with most other houses agreeing.

The rand continues to defy all predictions. He predicts that if it breaks the $5.80 level this will be crucial and could spark more activity, keeping in mind that the rand strength hurts resources shares while helping the retail sector. The trend remains your friend, and it has now entered its 8th year.

He predicts more listings and an increase in merger and acquisition activity as has been seen in Europe and the US.