Market fears 'create opportunities'

Johannesburg - Share markets seem to be suffering indigestion because trading, also on the local bourse, is becoming more volatile.

What markets need is "healthy food", and such nourishment is in prospect said Alwyn van der Merwe, director of investments at Sanlam Private Investments, at the group's investment forecast presentation on Monday.

The "healthy food" to which he is referring is analysts' forecasts on companies' earnings.

Analysts believe the earnings of companies on the JSE's all-share index could climb an average 40% in the coming year, he notes.

This growth is largely spurred on by the anticipation of robust growth in the earnings of resources companies, which analysts estimate could be 82% in the coming year.

Van der Merwe says such a large jump in earnings is quite possible if one looks at the low base from which most companies' earnings are coming.

He believes reasons for the "indigestion" are the return of risks that prevailed at the beginning of the crisis, and the resurgence of fears of a "double dip".

These include fears of a worldwide sovereign debt crisis and worries that Chinese authorities might tighten their economic policy. There is particular concern about the momentum of American job creation, Van der Merwe added.

He considered these fears unlikely to affect investment strategies, but that investors would rather regard them as a buying opportunity.

This is not a do-it-yourself market - volatility remains high and people's decisions are affected by the wrong factors, he said.

- Sake24.com

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