STANLIB's Weekly Focus 21 April 2008
EXECUTIVE SUMMARY OF STANLIB’s WEEKLY FOCUS
GLOBAL INVESTORS TAKING MORE RISK
* The US stock market rose by 4.3% last week to its highest level since mid-January and high-yield bond spreads fell from their peaks.
* The MSCI World Index rose by 3% during the week in dollar terms and by 4.6% in rand terms.
* If foreign investors are willing to take more risk again, then our market may benefit, as foreigners could possibly buy our shares! This is due to increased investor confidence achieved by the aggressive actions of the US Fed,
* History has proven over and over again that the best time to buy shares in the US (and therefore in most other markets too) is during an economic recession, because low share prices already reflect the bleak economic picture.
BCA RESEARCH STILL NEGATIVE ON SA
* BCA recommend that global investors remain underweight SA equities and bonds relative to Emerging Market indices.
* BCA argue that SA’s poor fundamentals are the reason for this call, rather than the “risk aversion” of global investors. “South Africa’s economic and financial conditions will continue to deteriorate.”
* The bottom line is that interest rates will stay high and the rand will trade on the weak side “to boost savings and cut back on consumption.” If foreigners sell SA shares because of the weaker economy, the rand will weaken further, causing bond yields to rise further.
SNIPPETS OF INFO
* The big caps in SA (ALSI 40 index) are outperforming the mid-caps and small-caps.
* The number of Russian billionaires has almost doubled in the past year to reach 110, partly because of the sky-high prices for Russia’s natural resources.
* The Bank of England has finally come to the party, announcing a near-100-billion-dollar plan to free up Britain’s home loan market in one of the biggest moves by a major central bank to combat the global credit crunch.
ECONOMIC UPDATE
* During the week all eyes will be on the South African consumer and producer inflation data, due to be released on Wednesday and Thursday respectively.
* On the back of all the negativity in the economy at present, consumer confidence declined significantly during the first quarter of 2008, as can be expected.
* On a more positive note, both manufacturing production and retail sales rebounded in February this year, and both would have supported the SARB’s (South African Reserve Bank) decision to hike interest rates earlier in the month.
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