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SPECIAL MARKET REPORT
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by Piet de Jongh and Pieter van Zyl (Noble Private Portfolios)
2009 Was a year of mixed emotions for investors. Fear and panic at the beginning of the year was reasonably quickly replaced by hope and optimism as green shoots sprouted and then grew and grew. Bear markets morphed into bear market rallies and ultimately talk of a resurgent bull market started to emerge. But the world is not fixed and talk of a correction is everywhere as the economic recovery stumbles along, albeit in the right direction. Dubai has taught us that the ramifications of the worst economic crisis in 80 years lurk beneath the surface.
The domestic economy has also drawn
signs of a modest recovery and we saw GDP growth moving back into positive territory.
Manufacturing is contributing positively and the construction sector continues to deliver. The consumer sector though remains under presure as unemployment rates increase and confidence fails to improve. However the banking sector has already relayed some of its debt policies and the domestic property and equity markets are showing signs of recovery which, along with the 2010 World Cup, should lift consumer confidence.
Leading indicators and GDP figures support the notion that South Africa is exiting the recession. Unfortunately it is too early to confidently assume that a full recovery is inevitable in 2010. Currently the recovery is "patchy" and dependent on governments infrastructural
spending as well as monetary stimulus, indicating that like the rest of the world, a sustained recovery will only be convincing when consumers regain confidence and drive economic growth.
By leaving the Repo rate unchanged the Reserve Bank indicates that risks and vulnerabilities still remain.
Unsustainable fiscal positions as well as the need to reverse previous unconventional monetary policy interventions may also pose a risk to the global growth outlook.
The next couple of years are going to prove very tricky for investors as policymakers, companies, consumers and equity markets navigate their way through the risks associated with a wounded yet recovering world. In this environment most investors are choosing to leave the asset allocation, sector allocation and
general investment decision-making to the professionals.
Capital preservation and patience will lead an investor to the point where the capitalisation of opportunities to come will make him reap future benefits.
We are slowly, moderately enhanching interest bearing investments by switching into defensive equity market portfolios to gain higher returns.
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