Not a year for decent returns

It's enough already! The thought of trying to squeeze out a decent return from volatile markets for yet another year is unimaginable, and we are still only in December.

I am tired of searching for defensive companies with reliable management and sound financials, that pay generous dividends and debate whether one should accumulate gold as a hedge against a possible global meltdown.

I want to return to boom times, where entrepreneurial companies with exciting growth prospects make their debut on the JSE every other day, offering us the only real opportunity of puffing our wealth.

It's been almost five years since two popular US hedge funds, exposed to the sub-prime market, failed and set off a crisis that led to the bankruptcy of giant investment banker, Lehman Brothers, triggering a global credit crisis that now threatens the stability of the European Union.

After months of ignoring the disquiet in financial markets, European heads finally conceded that the troubles in the eurozone were more worrisome than they initially acknowledged, requiring urgent attention if they wanted to preserve the single market.

Yet despite working until all hours of the morning last week to devise a salvage plan, investors have responded with frosty indifference to the leaders' last-minute negotiations; the need to grow the regions' economies with near-militant demands to slash spending in the indebted nations being their biggest fear.

The spreads (difference in annual yields on 10-year bonds) between industrialised countries such as Germany (2.14%) and France (3.25%) and heavily indebted Italy (6.30%) and Spain (5.68%) remain as wide as ever, signalling an absence of investor support that could ultimately force the European Central Bank to back down on its intractable stand of becoming a lender of last resort.

Things are not that much happier on the other side of the Atlantic, though full credit to Federal Reserve governor Ben Bernanke, whose vigilance and instant responses to danger have enabled him to hold down long-term borrowing-costs in the US to 2%.

Still, low self-esteem, high household debt, pedestrian job-creation, declining property values and bitter battle-lines between leading political policy-makers have seized the cogs that drive the world's most influential economy. And with 2012 an election year, neither of the self-serving parties is likely to moderate its obstinate behaviour for the sake of the beleaguered public.

So, until the investiture of a new president in January 2013, the US will waver irresolutely, absorbing the muckraking and slander that usually characterises the build-up to a presidential election.

With Europe and the US accounting for half the commercial activity in the global economy, it is hardly the backdrop ordered to incentivise business leaders to take on more risk and expand their operations.

Though, the other 50% of the world economy is beginning to appear more attractive and could offer us a way out of the doom and gloom that has moulded our consciousness over the past five years.

In that time, emerging countries such as China, India, Brazil, and Russia have climbed in importance in the world pecking order.

Their large populations, industrialisation policies and rapid growth have reshaped world trade, unleashing an unprecedented demand for raw materials and supply of cheap manufactured goods and services. In 2010, China surpassed Japan as the world's second-largest economy and forecasts are the country's GDP will match the US in the next decade.

According to the IMF, the global economy is expected to grow about 4% in 2012 with most of the expansion originating from emerging economies.

But one cannot completely discount the significant trade in goods and services provided by the developed world and the outcome that a slowdown in these regions will have on the performances of the emerging economies.

Our local stock market is populated with companies that are expanding their businesses into these fast-growing economies and the success of their dealings in these territories was demonstrated by impressive share price gains during the past year.

Against a modest increase of about 2% in the JSE overall index, cigarette manufacturer British American Tobacco advanced 45%, brewer SAB Miller 19%, luxury-goods producer Richemont 11% and iron-ore miner Kumba 19%.

Reading a number of international magazines over the weekend, it seems exposure to emerging markets is a theme dominating fund managers' choices for 2012, with companies such as Procter and Gamble (consumer staples), Daimler (luxury motor cars), Royal Dutch Shell (oil refiner), Rio Tinto (diversified miner) and ABB (electrical engineering giant) among their top selections.

At best, 2012 promises to be another tough year for savers as world leaders continue to disentangle themselves from the financial muddle that first surfaced five years ago, deferring any hopes we may harbour of returning to those dazzling days of dizzy returns.

But if only a handful of our corporations, exposed to markets in rapidly advancing emerging economies, are able to repeat their 2011 earnings performance, there is little more we can wish for in 2012.