Asset managers share their predictions

The results of Investment Solutions’s biannual Asset Manager Survey shows that asset managers are still bullish on local and international equities, but slightly bearish when it comes to the rand—about 80% expect the rand to trade between R7,25/$ and R8,50/$ by year-end.

Managers also expressed greater optimism about global growth prospects for this year. “The majority of managers revised their economic growth forecasts upward for SA, UK, Europe and the US,” said Thobile Thukani, market and economic researcher at Investment Solutions.

Thukani said 60% of fund managers were “mildly bullish” on the FTSE JSE All Share Index’s prospects, expecting it to end 2011 between 34 000 and 37 000. Thirty-three percent of managers were neutral, expecting the index to end the year between 30 000 and 34 000, while 7% were bearish, looking at a year-end level of between 26 000 and 30 000.

Overall, though, managers are more bullish this year than they were last year, when 93% didn’t see the market closing the year about 30 000.
The All Share Index ended 2010 at 32 118.

Looking at international markets, 71% of the managers were “mildly bullish” on the bellwether S&P 500 index, expecting it to end 2011 between 1 350 and 1 500, while 29% were “neutral”, anticipating a year-end range of between 1 250 and 1 350. Not one of the managers was bearish.

Country prospects
For South Africa, 53% of managers expect GDP growth of between 3% and 3,5%, while 47% see frothier growth of between 3,5% and 4,5%. However, 73% of managers see inflation rising from current levels to between 4,5% and 5,5% by year end, while 27% were more optimistic, expecting it to remain between 3,5% and 4,5%.

When quizzed on the US economy, 13% of managers were “mildly bullish”, calling a GDP growth rate of between 3,5% and 4,5%. Eighty percent were “neutral” (GDP between 2,5% and 3,5%) and 7% were mildly bearish (GDP between 1% and 2,5%).

A large majority of managers expect interest rates to remain flat in Europe (69% of managers), UK (62% of managers) and US (87% of managers) in 2011. “In SA there’s a small bias towards a hike in interest rates later this year,” said Thukani. 

Opinion is more mixed when it comes to commodities.

On the gold price, 43% of the managers were “neutral”, expecting the yellow metal to end the year between $1 300 and $1 450 per ounce; 21% were “mildly bullish” (between $1 450 and $1 600 per ounce) while 36% were “mildly bearish” (between $1 100 and $1 300 per ounce).

For the year-end oil outlook, 57% of the managers were “neutral” (between $90 and $100 per barrel), 14% were “mildly bullish” (between $100 and $120 per barrel) and 29% were “mildly bearish” (between $70 and $90 per barrel).

Investment Solutions next Asset Manager Survey will be released in August 2011. The survey takes into account the economic and financial market views of 15 of South Africa’s top-ranked asset managers.

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