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Johannesburg – For the third consecutive month in May‚ SA continued to be the least-favoured major emerging market according to fund managers polled by Bank of America Merrill Lynch.
Foreigners had up until May 10 bought more than R14bn worth of South African equities and more than R22bn worth of bonds so far this year.
The poor sentiment toward SA‚ with global fund managers just over 80% underweight in South African investments‚ was in part due to a negative outlook on commodities.
The Bank of America Merrill Lynch Fund Manager Survey for May said that investors were positioning themselves for slower growth in China and prolonged low inflation – sending commodities allocations to a four-year low.
A quarter of the respondents in May’s survey said a hard landing in China as well as a commodity collapse was their number one “tail risk”‚ up from 18% in April.
The respondents sent strong signals that they saw little threat of inflation. A net 30% expected global core inflation to rise over the coming year – down from a net 45%.
Investors have responded by reducing allocations to commodities and emerging markets and upping allocations to bonds.
A net 29% of global asset allocators are underweight in commodities – an increase from a net 11% in March and the worst reading since December 2008.
“May’s Fund Manager Survey demonstrates a clear exit from China and assets connected to China such as commodities and emerging market equities," said Michael Hartnett‚ chief investment strategist at Bank of America Merrill Lynch Global Research.
He added that it is worth noting that investors are keeping faith in global growth.
Foreigners had up until May 10 bought more than R14bn worth of South African equities and more than R22bn worth of bonds so far this year.
The poor sentiment toward SA‚ with global fund managers just over 80% underweight in South African investments‚ was in part due to a negative outlook on commodities.
The Bank of America Merrill Lynch Fund Manager Survey for May said that investors were positioning themselves for slower growth in China and prolonged low inflation – sending commodities allocations to a four-year low.
A quarter of the respondents in May’s survey said a hard landing in China as well as a commodity collapse was their number one “tail risk”‚ up from 18% in April.
The respondents sent strong signals that they saw little threat of inflation. A net 30% expected global core inflation to rise over the coming year – down from a net 45%.
Investors have responded by reducing allocations to commodities and emerging markets and upping allocations to bonds.
A net 29% of global asset allocators are underweight in commodities – an increase from a net 11% in March and the worst reading since December 2008.
“May’s Fund Manager Survey demonstrates a clear exit from China and assets connected to China such as commodities and emerging market equities," said Michael Hartnett‚ chief investment strategist at Bank of America Merrill Lynch Global Research.
He added that it is worth noting that investors are keeping faith in global growth.
