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Investors' increased uncertainty resulted in the net outflows of local general equity funds during the last quarter of last year.
Investec Asset Management director, Jeremy Gardiner, said heightened fears around subprime issues in the US, the US housing market and warnings of a possible recession had left lots of investors panicking.
These fears have intensified even further in the first quarter of this year, as US investment banks were forced to write down further substantial losses.
The US housing market continues to deteriorate and the recession in that country's economy appeared increasingly likely.
"In this environment investors are likely to remain cautious towards equities and we envisage low equity asset allocation funds will attract attention going forward," he said.
Gardiner said while the outlook for equities in the short term was not great, much of the bad news was already priced into equity markets worldwide.
He said while the consumer boom that had driven earnings and the stock market domestically for four years had slowed substantially, corporates were finally spending significantly and the government's massive infrastructure spend over the next three to five years would continue to drive earnings and growth going forward.
He advised investors to expect slower growth and slower markets, but warned them not to time the market. - Isaac Moledi.