Executive Summary
Last week was an amazing week for our stock market and offshore markets. In the midst of concerns about a correction and Egypt, the market promptly jumped 4.3% in rands (3.4% in dollars, not shabby) to another post-crash high as the US market gained 2.7% in dollars and the MSCI World Index gained 2.3%.
- For good measure, Anglo American stole the show, jumping 12% in one week, followed by Billiton and Sasol’s 9%. So yes, the JSE Resources index was up 8.7% to its best level since mid-2008, while the Financial & Industrial Index rose just 1.3%, despite a nasty 7% fall in the Construction Index.
- The ALSI 40 Index, with 48% in Resource shares (including Sasol), is benefiting from this run (Anglo & Billiton comprise 29%), while 44% of the All Share Index is in Resources, also quite high. Most SA fund managers benchmark themselves against the SWIX Index (Shareholder Weighted Index), which excludes foreign holders of our shares and has about 32% in Resources.
- Meanwhile, the SA Listed Property Index is now down almost 8% from its recent January 10th high and is also trading 5.5% below where it was 4 years ago (peak in 2007). On a forward dividend yield of 8.8% 12 months out, it is starting to look quite attractive relative to bond yields (now at a similar yield after a big jump) and money market yields (now 5.6% and maybe 7% in 18 months time).
- However, the unknown is whether the rand continues to weaken. If it does, it may cause bond yields to rise over 9%, which could negatively affect listed property further. If investors wanted to buy listed property at this stage, perhaps using a phased approach makes more sense, i.e. buy some now and hold off pending the rand’s movements.
To see the full review; please Read on…..