There is light at the end of the tunnel for South African consumers. All the local banks are expected to follow Standard Bank’s example shortly and start lowering their lending criteria for households, which could lighten the heavy financial burden of households considerably.

Since mid-2005 banks have raised their lending criteria. The National Credit Act introduced in July 2007 has also severely hampered the borrowing capacity of households. Over a two-year period the South African Reserve Bank also increased its repo rate to banks from 7% to 12% in 2008, resulting in the prime overdraft rate increasing from 10,5% to 15,5%.

Banks and other financial institutions previously encouraged people to use their so-called home equity to improve their lifestyle. This trend came to an end last year and in many instances it was reversed when property values started declining as a result of the downswing in the house market.

This post is a guest contribution by Dr Mark Mobius, executive chairman of Templeton Asset Management.

Emerging markets surged in the second quarter of 2009 with the MSCI Emerging Markets Index returning 34.8% in US$ terms. Part of this return was due to weakness in the US dollar. A return of confidence in emerging markets, the desire for higher returns and the search for undervalued companies support the markets’ uptrend.

Latin American and Eastern European markets were among the strongest performers during the quarter, while most Asian markets also recorded strong double-digit returns. A rebound in commodity prices and stronger domestic currencies supported markets in Latin America. Asian markets continued to attract significant portfolio inflows allowing markets such as China, India and Thailand to outperform their regional counterparts. In Eastern Europe, Hungary returned 69.7% in US$ terms in part due to a strong forint. Poland returned 37.0% in

Investment managers of balanced portfolios use a myriad fundamental and technical indicators on which to base their decisions regarding their portfolios’ allocation between equities, bonds property and cash.

And following a 27,3% rally in domestic equity prices since the FTSE/JSE All Share Index hit a low of 18 121 on 3 March this year, the decision regarding whether to overweight or underweight equities has become somewhat more difficult, to say the least.

A method of trying to gauge whether equities are cheap or expensive is to compare their valuations with those of other asset classes. One such technical indicator that managers look at is where equities are trading relative to bonds. To do this, one can compare the earnings yield on equities with the current yield on long-term bonds.

The earnings yield on the FTSE/JSE All Share Index (see Graph A) has declined from 12,4% when the market reached