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Is it time to dance closer to the door?

02 February 2006 Angelo Coppola

Where is South Africa going, asks Jeremy Gardiner of Investec Asset Management, and what about the party?

Not an easy thing to predict, but certainly a good start to the new year, says Jeremy Gardiner, from Investec Asset Management.

The party is not over, but dance closer to the door, we are in the middle of the charge he says. The question is how long can it go on, and is there a vicious turn coming, as we have experienced in the past.

It was a great year in 2005. Its as good as it gets. 9.2% in equities returns this year alone. Foreigners were getting good returns too. The world of the boom bust cycle will be lessened significantly, as we have a sustainably lower interest and inflation rate.

On the resources side precious metals are booming, and the miners are getting more dollars for their gold.

Food will be the biggest driver of inflation rates droughts have affected meat prices and wheat farmers didnt plant because of the draught, which is driving prices higher.

Oil should stay stable, despite all the international threats and the consumption rates of China.

There should be more foreign interest as the emerging funds are still underweight, and the JSE features only 10%, while Hungary is 90% owned by foreigners. And finally the JSE is traded on valuation and not emotion and this is a significant shift.

The emerging markets are still volatile, but they are in far better shape, the danger is that a poorly performing emerging market could affect the others. And while South Africa out-performed the western markets by 31%, its well down on the likes of Egypt that out-performing by more than 100%.

On the locally property front there are 70 000 agents in the market, up from 40 000 not so long ago, but property will slow.

So what can government do about a strong rand build reserves, lower interest rates and drop exchange controls, but ultimately it is out of their control, as they have done almost all of the above.

Dont expect CPIX plus double digit numbers.

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