• Sharebar
Investment Strategy
Tuesday, February 1, 2005
Sanlam survey

Local equities remain the preferred investment choice for asset managers and returns of 10% are expected over the next 12 months. That is the houseview of six leading asset managers surveyed in Sanlam Personal Portfolios’ (SP²) fourth quarter Bull and Bear Report. Local equities have consistently been favoured above bonds since the first survey was released in February last year.
Based on the survey’s findings, the rand is expected to depreciate against the US dollar and euro over the next 12 months — at least at the time the report was issued mid-December 2004.
Inflation and interest rate expectations remain unchanged from the third quarter survey. Most of the fund managers say inflation will trend upwards over the next 12 months, but are divided on whether the repo rate will remain stable or trend upwards.
On the global front, emerging markets – in particular South Africa, Brazil and Russia – are still favoured above developing markets. None of the fund managers see value in the US or the Euro-zone.
The majority predict the oil price will remain below US $40 a barrel over the next 12 months. They also expect the gold price to decline from its current level of $452 to between $400 and $450 over the same period.
On an equity sector level, the majority of the fund managers are bullish on financial and industrial counters, and neutral on small caps, mid caps, IT and resources counters.
“Since the release of the first survey, the fund managers’ predictions for equities and cash were particularly accurate. However, the performance of bonds was underestimated,” says Shaun Ruiters, Fund Analyst at SP² Advisory Service. “Cash returns were within their expected range and, after August’s equity market run, the expected performance for equities, in excess of 10%, became a reality.
“Resources have steadily declined, while the fund managers held a bullish to neutral view on these counters,” he adds. “Their bullish views on financials and industrials panned out as the Findi index climbed by around 30% as expected.”
He says the strong level of the rand was totally unexpected. In the first survey, conducted in February 2004, the fund managers did not expect the currency to strengthen to such an extent against the US dollar or euro.
“Inflation was also expected to move upwards, but has had a continuous downward trend,” he observes. The South African Reserve Bank surprised the market with its cuts in interest rates.
The six leading South African asset managers who provided their houseviews on all major economic indicators, as well as currency, equity and bond markets over the next 12 months are Coronation Fund Managers, RMB Asset Management, Old Mutual Asset Management, Stanlib Asset Management, Sanlam Investment Management and Investec Asset Management.
SP² Advisory Service is an independent research and fund advice division within SP².

Copyright © Insurance Times and Investments® Vol:18.1 1st February, 2005
547 views, page last viewed on July 5, 2020