STANLIB's Weekly Focus 07 April 2008

EXECUTIVE SUMMARY OF STANLIB’s WEEKLY FOCUS

MARKET NEWS

• Despite all the fears and uncertainties out there and despite all the headwinds too (possible interest rate hike this week in SA), including the credit crisis, which is still very much in evidence offshore, markets have been quite buoyant of late.
• The copper price is once again close to challenging its all-time record high price, despite last week’s news of a weaker-than-expected US economy. So far the mighty commodity boom remains intact, to the benefit of all of our mining shares, with Billiton very close to its record rand price high. Sadly, rice, a staple food for about 2.5 billion people in South East Asia, is at a 34 year high, partly because of higher demand and lower supply.
• Offshore listed property shares have recovered 12.7% from their lows in dollar terms and the STANLIB International Property Fund is now up 2% in dollar terms in 2008 (up 16.6% in rand terms)
• Elaine Garzarelli, the market analyst in the US, says that the housing market slump is extending to other areas of the US economy, hence she expects the Fed to take rates down another 75 basis points by mid-year to 1.5%. History proves over and over again that the best time to buy shares in the US is during a recession, so she continues to recommend gradual buying of shares into this economic slump.
• JP Morgan’s South African Equity Research point out that the MSCI SA 12-month forward price-to-earnings ratio (PE) is a mere 10.4, which is cheap and back at similar levels as existed in 2004 and 2005.

ECONOMIC REVIEW

• The interest rate decision this Thursday 10 April is proving to be an extremely close call, with consensus sitting on a 50/50 probability of a 50 basis point hike in the Repo rate. Although it will be an extremely close call we are still in view of flat rates due to a substantial slowdown in the real economy. The SA Investec manufacturing PMI weakened significantly in March; SA money supply and credit growth slowed more than expected in February, and SA passenger vehicle sales plummeted in March this year.
• Another indication of recession in the US was released at the end of last week as US employment fell by more than expected in March, down 80 000. The unemployment rate is now up to 5.1% and is expected to move higher.

Click here to download the full focus (PDF file 219kb)