Johannesburg — MARKET analysts expect earnings of JSE companies to grow 40% on average over the next 12 months, boosted by expectations of substantially more earnings growth from resource shares, says Sanlam Private Investments director Alwyn van der Merwe.

In an overview of the investment market for the next quarter, Van der Merwe said yesterday the analysts expected earnings of resource stocks to climb 82% over the next 12 months, which he said was not an unrealistic target, given the decline in resource stock earnings last year compared with 2008, he said.

Resource stocks had returned 44% a year between 2004 and 2008. But Sanlam did not intend to go overweight on them because mining companies in SA were being plagued by rising costs.

"These companies need high commodity prices to grow profits. Commodity prices have already recovered well and a repeat performance of last year is unlikely from the current high levels."

He said local shares had mostly tracked sideways, in spite of rising volatility in the markets, since October, which was a similar pattern to trading on US and other global and emerging markets.

The reason was that "there are quite a few bearish bulls out there", with renewed concern about the sustainability of global economic growth due to fears of a global sovereign credit crisis, worries about China reining in growth, the end of quantitative easing, increased bank regulation and worries about US employment momentum.

But Sanlam did not believe these concerns were "game-changers". Share price valuations were quite high, particularly in emerging markets, but the global recovery was intact and there was "a great deal of liquidity sloshing around with no real alternative but to invest in equities".

Deutsche Securities director Kari van Rensburg said it expected equity growth in SA and major developed markets to be similar this year. "Gains of around 15% look possible for 2010."

He said the rand could depreciate against the currencies of some developed countries and in this scenario, equity returns would be enhanced by gaining exposure to equity markets and also developed market currencies.

Van Rensburg said the rand might weaken by year-end to about R8,50/ from about R7,55 . The rand-sterling rate might weaken to R13,52 from about R11,30, while the level against the euro might slip to close to R11,48 from about R10,30.

Asset management firm Stanlib and life assurer Liberty said in their Weekly Focus publication the past six days had been good for stock markets, with the JSE all share index up 5% since its February 26 close and up 55% over the past 12 months, in spite of "massive rand strength".