Markets are not following the script

These are unusual times and there are many anxious individual investors.

What is unusual is that the JSE - which recently broke 23000 - continues to rise as inflation is rising, says Paul Hansen, at Stanlib.

And Hansen says that this activity has caught a lot of the short traders on the local market completely unaware.

The bond markets are also not behaving as they should, and are surprising resilient, and it appears that the bond market is telling us that the interest rates shouldn't be rising much further. On an international level he warned that investors ignore the USA bond market at their peril, as it's a very efficient market.

Back to the local market, the boom in oil prices has meant that profits have jumped some 15% in 2006, and its money looking for a home.

Hansen says that perhaps these profits could be behind the EDCON deal announced earlier in the week, as Hansen says that the local private equity market doesn't have the R20bn to do the deal. 

Turning to two of the more interesting sectors, he says that SA retailers are rallying, as they had dropped 30% in May and June and are now outperforming the All Share.

However in general terms, prime rates are going up and historically the pe should be dropping. This isn't happening - yet, and the financial and industrials aren't re-rating yet either.

Comparing SA and to the US Hansen says that pe ratios are now similar, although SA has superior economic and earnings growth, with SA JSE earnings growth expected to be over 20% next year.

SA shares remain cheap relative to bonds, and foreigners are now neutral on SA, while property shares moved due to investors who had no experience getting frightened. The small guys made the moves, and there is a narrow entrance and exit door.

It appears that there are some big institutional buyers, like the PIC and the government pension fund, getting into property. This could lead to some stability in the sector. Interestingly enough it appears that the individual investors are still getting out of the property market.

Precious metals are an interesting area. All of which falls into the boom in metals and gold is being pulled along by default, if the boom is in tact. The shares have been relatively quiet recently.

The commodity cycle can hold up quite nicely and the precious metals will remain solid.

All in all it's a bit of a mixed message.