South African fund managers adopt cautious optimism as gold positions rise

IOL News

24-04-2025

Consequently, noted the SA Fund Managers Survey report, growth and reform perceptions have turned negative, with recession risks rising.The number of surveyed managers who think 'a recession is unlikely' has fallen to 38% from 67% last month.
Tawanda Karombo
South African fund managers are preferring a high gold positioning as the country's economic growth outlook and confidence in reforms dim, Bank of America (BofA) data showed on Wednesday.
Confidence in South Africa's economic growth prospects has been dimming on the back of disagreements within the government of national unity (GNU). Geopolitical risks were also weighing in as the US and China tariff wars entrench although President Donald Trump this week hinted at a climb-down.
BofA's latest South Africa Fund Manager Survey nonetheless reflected a 'high positioning relative to history in gold, banks and bonds. This comes as a 'growth and reform hopes dim' with the top risk being 'political shifts' to the left.
BofA noted 'a net 38% see 'reform slowing' (against peak reading of a net 56% September 202)' against the backdrop of local and global mis-steps.
Consequently, noted the SA Fund Managers Survey report, growth and reform perceptions have turned negative, with recession risks rising.
The number of surveyed managers who think 'a recession is unlikely' has fallen to 38% from 67% last month.
A net 38% of surveyed managers expect the economy to get 'a little weaker' compared to a net 67% who expected 'a little stronger' economy last month. More than half of surveyed South African fund managers expected inflation to come in slightly higher and an exchange rate of R18.44 to the US dollar.
A lowly 8% of surveyed fund managers were overweight on OW equities, neutral bonds and cash while no manager wanted to sell local equities or bonds.
'For the first time in five years, they (SA fund managers) are net offshore sellers. For +12 managers, the preferred sectors are banks, software and apparel retail,' noted the report.
Domestic defensives and miners gained ground over domestic cyclicals.
Regarding South African bonds, SA fund managers showed neutrality despite varying views to the outlook. Overall, the managers 'want to buy bonds' while 'no manager wants to decrease exposure' to bonds.
Over a 12-month view, industrials and financials appeared to lose ground to resources, especially on the back of gold prices rallying to record levels of above $3 500 per ounce this week.
Surveyed managers reflected a 'a less bearish resource tone' overall.
'Prior bearishness across all the resource sectors in previous surveys pointed to a resource index at or nearing a bottom,' noted the report.
Over the next 12 months, 'all sectors lose ground except life insurance' as banks turned to be the favourite sector and real estate the least preferred
In the industrial sector, the apparel retail sector lost its sizzle from the heights of the prior nine months although its still the second most preferred sector after software.
Still, domestics lost ground relative to the rand hedges.
'The current gap in favour of domestics has happened 38% of the time since 2006. The extreme gap in December 2024 had only happened 6% of the time.'
Although fund managers have exhibited growing concern over the outlook, Bank of America economists and analysts said earlier this month that South African corporates were optimistic of a positive earnings outlook.
Michael Jacks, head of South Africa research at BofA Merill Lynch, said that South African firms have exhibited resilience 'despite a host of headwinds' such as logistics logjams they have had to deal with over the past few years.
Nonetheless, South African banks and chief financial officers were now 'generally more cautious on the economy' than others.
'Companies are (also) still hesitant to invest due to global uncertainty, global reforms and lack of consumer growth (although) they are seeing investment in energy infrastructure,' said Michael Jacks, head of South Africa research at BofA
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