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An exceptional five years

25 April 2006 Angelo Coppola

Paul Hansen at Stanlib says that local asset class returns for the last five years has been exceptional, to say the least.

He also spoke about the international markets and some of their hote buttons.

In South Africa listed properties returning 23.9% all share at 20.5% and bonds at 14.7% and cash at 9.9%, while CPIX ran at 5.8%. Interestingly gold is now starting to outperform the All Share, with Hansen saying that its likely to go even higher.

Internationally he says that the local market has thumped the MSCI world index, and the big global markets, for the last eight years, now at its highest in the last 20 years.

There has been 68% increase in the market (return including dividends), over the last 12 months on the All share and there might be some anxiety, and some breathing space might be needed. Consider that for the last three years the market is up 211%.

Looking ahead Hansen says that should certain things continue to go right, then the current economic environment and these returns may well continue.

These include: The rand stays fairly strong, the commodity boom continues, foreigners keep investing in SA, the economy increases by at least 4% per annum, while unemployment begins to decline.

Added to which company earning to grow steadily, and stock and property markets appreciate similarly. Cross border Mozambique, Angola and perhaps even Zimbabwe grow strongly. But what are the chances of this happening.

SA bonds and property

Government bonds are sitting at the same levels as last year, and the trend is still intact, with some sideways movement, currently stuck at the same levels of 7.4%.

Offshore

Offshore equities in terms of the emerging markets, has shown some extraordinary returns where in one quarter Venezuela did 50% in dollar terms, Russia did 28%, China was back in the hunt with India who both did 21% and South Africa did 18%.

Compare this to the developed countries: Germany did 14%, Europe did 11%, while the Pacific did 7%, while the MSCI World index did 4%.

It is a little known fact that the China economy has been in decline for the past five years, with the turnaround starting in 2005.

The crude price is still on trend and still increasing. Its a bit of negative, although it appears that the world is resilient enough. If it goes to $100 then there may well be problems.

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