Rates to drop?

Rates could come down sooner rather than later, Sasfin market commentator David Shapiro speculated on Wednesday.

This, particularly in a strong capital development phase in which a lot of projects needed cash, he said.

If there was not enough cash available, South African Reserve Bank Governor Tito Mboweni would have to kick-start the process by reducing interest rates, Shapiro said. However, he anticipated rates coming down globally and said South Africa would be following the trend. He believed that even if the US approved a package to rescue its banks, the market was "in for quite a rough time".

With nowhere to go and no fresh news out of the US on Wednesday, though, South Africa's markets languished in "no man's land".

"Generally, our markets are doing okay," Shapiro said, but added that although strong, resources were still a bit disappointing and seemed to have gone off the boil for the meantime.

Waiting for Friday when

After a good recovery on Tuesday, a little bit of the edge was coming off now. Markets appeared to be waiting for Friday when, apart from the US decision, there would also be a jobs report. They were also waiting to see how the global crisis had affected corporate results and the real economy – where goods and services are exchanged, as opposed to the financial economy.

South African markets tumbled on Monday on news that the US House of Representatives had rejected an initial bid to bail out banks by buying up their worthless assets.

The reason for the US recess and delay in the vote on a second rescue package until Thursday was probably the celebration of the Jewish New Year, Rosh Hashana, with many members of the House being Jewish.

Shapiro said the markets had discounted the fact that there was going to be another vote as it was "more than likely" something was going to go through.

Next package would be passed

After an outpouring of outrage at the rejection of the first bail-out bid, there was a strong expectation that the next package would be negotiated and passed.

Sanlam Private Investments branch manager Manny Adebowale expected South Africa's markets to remain "very volatile" until a bail-out deal was in place.

"If it doesn't, then we're all in trouble," he said on Wednesday.

The markets went up "quite nicely" on Tuesday, as did the Dow, so investors were "just cashing up now", he said.

The Johannesburg Securities Exchange was up .77 percent on Wednesday afternoon, with resources up 1.8 percent, the gold index up 1.1 percent, financials up .33 percent and the Top 40 up .7 percent. The only index which was down was industrials, by .45 percent.

The sentiment was one of "wait and see", as investors anticipated the US's decision on a second proposed bail-out plan, said Adebowale.

If it did not go through, there would be a credit squeeze on all the banks.

"But I think it is going to go through, because everyone knows they are in trouble," he said.


Article from: www.sapropertyinvestor.co.za