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To: Jim Willie CB who wrote (113594)	2/23/2002 9:45:57 AM
From: stockman_scott	Respond to of 152472

Commodity cycle about to turn Business Day 23 February 2002 ---------------------------------- HOLDERS of SA resource stocks are in line for a second windfall as the commodities cycle turns upward, according to Clyde Rossouw of Investec Asset Management. Addressing clients and financial intermediaries at a presentation yesterday, Rossouw said that the commodity cycle appeared to be close to the bottom, so resource companies could look forward to receiving higher dollar prices for their products. "Only the rand's depreciation has been priced into the market; the upside of rising commodity prices is not yet in share prices," he said. "If one assumes a normal cycle, an upturn coinciding with global economic recovery could mean a rise in commodity prices of up to 20%." Rossouw, who co-manages the Investec Equity Fund, said capacity utilisation was a good indicator of a sector's ability to raise prices, even in a depressed environment. By this measure resource stocks were best placed to improve earnings over the coming year, while the technology sector was most constrained by excess capacity. SA banking shares were undervalued, he said, but there was "still room for consolidation", with corporate activity over the coming quarter likely to generate bargains for wide-awake investors. Investec Asset Management director Jeremy Gardiner said that, although subdued corporate earnings would prevent a rapid "Vshaped" global economic recovery, the "fear of the markets has changed to fear of losing out" and the outlook for equities was favourable. SA share prices remained cheap by global standards, despite the post-September 11 bull run, and although inflation would rise due to the weak rand, it should decline again from next year. "The probability that the rand will strengthen rather than weaken from current levels is high, given that we have experienced the worst 12-month rate of change ever. "Given our expectations for a recovery in global economic activity, we believe the equity market will benefit from a rerating into a global upswing," Gardiner said. UBS Warburg economist Michael McClintock said that, once people realised that the currency was inherently cyclical, the market would look at the rand differently, and might then even view it as overvalued rather than undervalued. He said that when economic growth was strong, the rand had been more stable, and that just after most of the players in the market thought that growth had peaked, the currency weakened. Despite a recent Economist Intelligence Unit survey that showed SA as one of the cheapest countries in the world, McClintock said that the countries SA had bettered were developed nations, and that the country had lost out to competing emerging markets including the likes of China, Indonesia, Poland and the Czech Republic. The rand's losses, McClintock said, might be as a result of the currency trying to correct the fact that the country still has a relatively high cost base. ______________________ businessday.co.za