Resources in demand

2011-02-05 00:00

SELECTED equities in South Africa and the developed world could offer investors better returns than other asset classes in 2011.

This is according to Gail Daniel, portfolio manager at Investec Asset Management, who addressed guests at a briefing in Durban this week. Daniel noted that they are fundamentally bullish on equities, adding that this view applies primarily to certain resources stocks, United States equities such as U.S. banks, as well as certain South African equities.

She said that the world saw a collapse in the supply of resources after the 2008 financial crisis. Daniel said emerging markets continue to show a healthy demand for resources.

“There is a deficit in a lot of commodity markets. Prices are rising … and Chinese steel inventories are low.”

Having made a compelling case for equities, she added: “We think that equities are going to grind higher. There are pockets of excitement. It’s going to be expensive sitting in cash.”

Much has been said about the fate of the U.S. consumer in recent months. Daniel believes that they will recover in the near future.

“U.S. growth is expected to continue. U.S. consumers are paying off debt. Job growth is coming through and they will resume spending. U.S. corporates are profitable and the payroll numbers are expected to be on the up.”

She believes that U.S. banks will perform well once the U.S. consumer recovers. Consumers will begin to demand loans on the back of big-ticket purchases such as new vehicles and houses.

She added that South African equities valuations look good relative to other asset classes and she anticipates returns in the “mid-teens” this year.

Stocks of interest to Daniel include Rand Merchant Bank, Sasol, SABMiller, Anglo American, JP Morgan, BHP Billiton, Barloworld and Santam.

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