'Now is a good time to buy stocks'

WANETSHA MOSINYI
Staff Writer | Tuesday February 26, 2008 00:00

Before some international investors could settle down after the festive season, a significant amount of their returns from last year had been eroded by market volatility.
But in its preview and outlook for 2008, Investec Asset Management says there is 'no need for panic in the local market'.

Investec says the best insulation is to invest in stocks that are cheaper as people sell.
There are several stocks that still have solid fundamentals and respectable valuations, making now a time to buy rather than sell, the analysis notes.

Investec Fund Manager, Bakang Seretse, says the next few months should clarify things on how the local market is going to perform.
'We don't have all the answers,' Seretse says, 'but one thing is certain: there are exceptional buying opportunities coming soon because history teaches us that the greatest opportunities often arrive at moments of extreme stress in the financial system.'
The earnings season kicks off this month with the banks reporting and consensus forecasts foresee reasonable earnings from them.

'As a result, we may see positive sentiment returning to the market and delivering a temporary reprieve to investors,' Seretse continues.
'The best news here is that there is not a lot of room for stocks to fall even further as long as earnings do not decline in 2008.'

But what about the outlook for bond markets this year?  Seretse observes that with the prospect of inflation rising slightly in 2008, bonds will become unattractive in the ultra short term.

He says inflation risks still remain, given the triple whammy of high food inflation in South Africa, a weaker pula and high fuel prices.
Other inflation risks include BHC price increases and an expected hike in BPC tariffs.
The Bank of Botswana has categorically stated that it will leave interest rates as they are for the short term, but they are likely to hinge on how inflation pans out.

'And so far evidence suggests that inflation is going in one direction: the North,' Seretse says.
Another Investec analyst, Maungo Lebanna, says inflation could hit the 9 percent mark in the near future.

With regards to foreign exchange movements, Investec expects the Rand not only to depreciate against the dollar, but against European currencies as well.
'Our forecasts point to a stable pula in 2008,' says Lebanna, 'though with some caution as the rand will come under enormous pressure during the year.'
The local market will face some challenges this year, among them the impact of the slowdown in the United States.

The US is the largest market for Botswana's diamonds and textiles. Any slowdown in the US will affect the demand side of diamonds and result in less foreign receipts for Debswana.

The US may still see a recession, but this time, thanks to Asia, the rest of the world will slow, but not stumble.
'This is a reality we had better get accustomed to and learn to live with as it is here to stay. It will take 12 to 18 months to unwind the excesses of sub-prime and the housing market, so expect a bumpy ride ahead.'

Seretse says another challenge will be that of power outages.
 The load shedding BPC has embarked upon is going to impact negatively on growth and productivity levels in the economy, especially the mining and manufacturing sectors, he says.