South African fund managers remain overwhelmingly bullish on equities, with a net 83% expecting positive returns over the next 12 months, according to Bank of America’s latest Fund Manager Survey released Wednesday.
The survey reveals that 42% of managers believe the market is undervalued, with expectations that the All-Share index will reach 126,000 in the next year, up from the current 123,000. Managers anticipate total returns of 17% for equities and 10% for bonds over the next 12 months, while unanimously expressing bearish views on cash positions.
Economic optimism is evident with 75% of respondents expecting the economy to strengthen slightly over the coming year, while only 25% forecast slightly higher inflation. Managers project the USD/ZAR exchange rate to reach 16.96 in 12 months, with the repo rate holding steady at 6.42% and the R2035 bond yield declining to 8.50%.
The survey highlights high positioning relative to historical norms in software (1.8 standard deviations), bonds (1.8sd), equities (1.7sd), gold (1.3sd) and life insurance (1.1sd). Conversely, managers report significantly low positioning in offshore investments (-2.6sd), cash (-2.6sd), healthcare (-1.8sd), telecommunications (-1.7sd) and chemicals (-1.2sd).
Looking ahead 12 months, fund managers express strongest preference for banks, metals and mining, and retailers, while healthcare, telecommunications, and investment banks and brokers rank as least preferred sectors. Real estate positioning has reached its highest level in over six years, with managers indicating intentions to increase exposure to domestic stocks.
