It's been equities all the way since March 2009, with investor sentiment rebounding from the depths of despair and the equity market soaring to regain two-thirds of the value lost during the great crash of 2008.
It was a different story for bond investors, who over the past 12 months have had to be content with a total income and capital return of just 7%. But things could be changing in favour of bonds, judging by the buying behaviour of local and foreign investors.
"There is a shift in asset allocation from equity to bonds among [local] fund managers," says Henk Viljoen, Stanlib's head of fixed interest.
His view is echoed by others, including Investec Asset Management portfolio manager Mokgatla Madisha. "The consensus view on equities is that it's time to wait for earnings to catch up with the rise in share prices," says Madisha. "This has prompted a greater emphasis on bonds."
Showing full agreement, foreign investors are aggressive buyers of SA bonds. JSE data shows net foreign purchases of SA bonds in the first two months of 2010 of R11bn, a big reversal from net foreign sales of R2,4bn in 2009. It also sets the scene potentially for 2006's record R30,4bn net foreign purchases to be eclipsed.
A number of powerful factors are working in favour of foreign investment, not least generous yields on SA bonds compared with those in most foreign buyers' home markets.
Leon Krynauw
On offer in SA are yields hovering around 9% on government bonds maturing in 30 years, a tempting premium compared with the 4,5% to be had on 30-year UK and US government bonds. Even lower, at 3,9%, are yields on German 30-year bonds, while in Japan the yield is just over 2%.
Also working in SA's favour, says Viljoen, are the two key themes of global investors: commodities and emerging markets.
Interest in emerging markets is being driven not only by more attractive yield and economic growth prospects, but also by concerns over some developed countries' stability, says Viljoen. Providing a vivid example, credit rating agencies Moody's, Standard & Poor's and Fitch warn that in the wake of a huge increase in government borrowing, UK sovereign debt is in danger of losing its AAA rating.
Unthinkable before the global financial crisis, loss of AAA status, the highest credit rating, would have a negative impact on UK bond yields.
In the run-up to the national budget in February, buying of SA bonds was curbed by fears that government spending would escalate out of control and that the SA Reserve Bank's mandate to control inflation would be changed, says Madisha. These fears were dispelled by the budget, he adds.
Positive market reaction to the budget was confirmed by the reception given SA's first and only foreign bond issue for the year. Completed on March 3, the US$2bn, 10-year issue was the largest yet in US dollars and was closed at a yield of 5,59%, the lowest SA has ever paid in the dollar market. Moody's rated the issue at its seventh-highest rating, A3.
The issue came against the background of debt funding by government and state-owned enterprises such as Eskom, Transnet and the SA National Roads Agency scaling new highs. Government alone is set to raise a net R237,7bn on the domestic bond market, up from R171,5bn in 2009/2010 and a cumulative R58bn in the preceding five fiscal years. Add parastatals' capital needs in 2010/2011, and total funding demand on the capital market in 2010/2011 is just short of R300bn, excluding private-sector issues, says Viljoen.
Also indicating robust investor demand, private issuers are active in the bond market. All four big banks have recently completed multi billion-rand issues and all were oversubscribed, says Viljoen.
The big question for investors is whether the downward trend will persist and, in the process, generate further capital appreciation.
The answer appears to be yes. With other positive factors adding to the attraction of current yields, the weight of probability supports an extension of the bullish trend. Among the positives is the inflation outlook, a key influence on bond yields.
For individuals seeking yield and potential capital appreciation, bond funds appear to have solid appeal at present. But as with any investment subject to swings in market sentiment, there are always risks.
Leon Krynauw, head of fixed interest securities at brokers Barnard Jacobs Mellet, is among the market players cautioning investors not to expect a "roaring bond bull market". Central to his caution is the huge volume of new issues.
WHAT IT MEANS
 SA bond yields well ahead of other markets
Cautious investors can buy income funds
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Viljoen feels SA will enjoy positive investor sentiment in the first half of 2010 but is wary about investors' ability to continue absorbing huge volumes of paper over the next three years. He points to another risk: potential global economic uncertainty in the second half of 2010.
Global economic indicators are rising strongly off a depressed base and supporting investor optimism, he explains. Potential uncertainty will come when they start rolling over and even falling in the second half of 2010, he cautions.
For investors confident they can exercise timing, bond funds appear to be a good bet at present. For those of a more cautious bent, Viljoen and Krynauw advise income funds.
Offering solid yields and an element of capital growth, an income fund's potential risk is moderated by its limitation to debt instruments with an effective maturity of no more than two years.
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