STANLIB sticks by 17% equity growth forecast

STANLIB, the countrys largest unit trust company, is sticking by its forecast of 17% equity growth this year, despite the recent JSE correction that knocked 7.5% off of share valuations.

The company also acknowledges that the equity retreat first evident in China and then replicated in markets around the world may not be the last pullback of 2007.

At  its worst  (down 7.5%), the current correction  had already eroded all the JSE gains for the first seven weeks of the year.

Paul Hansen, STANLIBs head of retail investing, noted: When the New Year prediction of continued equity gains was made, we factored in one or perhaps two corrections. We may yet see a second correction or the present one may have a little longer to run.

Even so, we see no reason at this stage to amend our view that there is value in the market and that a 17% return from our equity portfolios in 2007 is still possible.

We see the current correction as a healthy pullback in an ongoing bull market, both offshore and here in South Africa. It constitutes a buying opportunity, but as the correction may not yet have run its course, investors might usefully phase in the purchase.

Recent experience shows that bull-market corrections in developing countries generally last from five to eight weeks while losses run from 10 to 20%.

STANLIB professionals went on a national roadshow at the end of February to brief investment advisers in major centres on the stance taken on different asset classes and unit trust categories by its various franchises the specialisms within STANLIBs extensive product range.

The professionals predicted an imminent correction.

It happened the very next day! said Hansen. Thankfully, the core message had already been communicated that this type of event is quite normal and is a temporary pause for breath, not a tailspin.

The reason for STANLIBs confidence is its positive assessment of macro-economic prospects for the next five years as infrastructure investment rolls out and the middle class in SA continues to expand.

Hansen added: We believe these positives should be reflected in stock market returns. In other words, if an investor is underweight in equities this pullback is a buying opportunity; but take a five- or seven-year view, not a short-term one.