Equities likely to remain largely unchanged

According to the findings of the biannual survey aimed at gauging fund manager sentiment and their equity market return expectations‚ at least 62% of managers expect the all share index (Alsi) to finish the year between 37‚000 and 41‚000 points‚ while only 31% of managers think local equities will see further gains to close the year between 41‚000 and 44‚000 points.

Investment Solutions market analyst Thobile Thukani said managers' divergent sentiments on the industrial sector were quite striking.

"Of the managers surveyed 38% are of the view that the industrials index will close the year between 49‚000 and 53‚000‚ which is largely unchanged from current levels. Another 38% are highly bearish and anticipate the index to end below 46‚000 from current level of around 54‚000‚" Thukani said.

"Then again‚ 62% of managers are less confident on how the resource sector is going to end the year following the disappointment in performance so far. Only 38% of managers believe the sector will see modest improvements to close the year higher‚ at between 25‚000 and 28‚000 points‚" he said.

Favoured stocks

"In the equity market sectors‚ the most favoured were banks‚ insurance‚ platinum and media stocks. The least favoured were food and general retailers and gold mining‚" he said. Equities and cash remained the most favoured asset class‚ unchanged from the previous survey‚ while nominal bonds and property were the least favoured.

"On offshore equities‚ the majority of survey respondents have moved from bullish views to being more neutral on both the S&P 500 and FTSE 100 as expectations at the start of the year have already been exceeded. The S&P 500 has gained 266 points since January and managers believe that the index has limited further potential for gains," Thukani said.

The survey shows that managers are predicting low single digit returns or even negative returns in the coming months for fixed income. Although‚ local bond yields have risen sharply‚ almost half of managers surveyed expect local bond yields to climb even further to finish the year between 8% and 9%‚ while 54% remained neutral.

On gold bullion‚ a majority (62%) were neutral. Only 38% of the managers expected the gold price to end the year between US$1‚300 and US$1‚500. However‚ at the start of the year‚ 64% of managers saw the gold price ending the year between US$1‚500 and US$1‚700.

"No major movement in the rand is expected. The majority of managers expect it to trade between R9.50/$ and R10.50/$ by year end. Only 29% of managers think the rand could weaken further closing the year between R10.50/$ and R11.50/$‚" he said.

A majority of managers have become less optimistic about SA's growth outlook and expect SA to grow between 1.5% and 2.5% this year‚ compared with the previous forecast of 2.5% and 3.5%. The survey showed that 54% of managers expected inflation to remain within the 5% and 6% range‚ while about 46% saw inflation rising to between 6% and 7%.