A 5-year first for South African investors

For the first time in five years, fund managers in South Africa have become net sellers of offshore assets, with many turning to domestic assets.

Bank of America’s latest South Africa fund manager survey showed that investors are net offshore sellers for the first time after five years of net buying.

The survey, conducted earlier this month, incorporates the views of 13 fund managers. Bank of America said fewer managers are underweight on international assets, with many becoming sellers.

When asked whether they intend to increase, decrease, or maintain their offshore weighting over the next three months, a net 15% said that they would decrease their exposure, becoming net sellers.

Bank of America noted that offshore investments are well off the regulatory requirements, which allow for 45% of assets to be held offshore.

However, the current figure of 35% is a survey high and was last reached ahead of the 2024 National Election when uncertainty was extremely high.

The change comes amid heightened global uncertainty, with US President Donald Trump’s tariffs causing widespread panic in financial markets worldwide.

Although Trump has lowered his tariff on South African goods from 30% to 10%, he has escalated a trade war with China, with the two countries imposing tariffs of over 100% on each other.

Despite the pullback in offshore assets, South Africa’s picture is not improving, with many fund managers lowering their expectations on GDP growth.

A net 38% of fund managers expect the economy to get a ‘little weaker’ in April. In March, a net 67% expected the economy to get a ‘little weaker,’ highlighting a rapid shift in expectations.

The International Monetary Fund has recently slashed South Africa’s growth prospects, cutting its GDP 2025 growth figure by half a percentage point to a measly 1.0%.

The IMF’s latest World Economic Forecast states that no country will escape the escalating tariff war started by the United States.

The global organisation said that the impact of the US tariffs will be far-reaching and no economy will escape the shockwaves set to follow.

South Africa’s internal improvements also took a hit, with a net 38% of managers in the survey also seeing reforms slowing, well below the peak reading of 56% seeing an acceleration in 2024.

A net 38% of managers think a recession is unlikely, down from a net 67% seen only a month prior. 

 Do you intend to increase, decrease or maintain that weighting for the next three months?

Where is the money flowing

The survey also shows that the viewpoints on South African assets remain strong, with many drawn to equities and bonds.

Although there were fewer net equity bulls in April (54% vs. 73% in March), the figure still shows that most managers are optimistic about equities.

The preferred sectors for investors are banks, software and apparel retail. Domestic defensives and mining assets have also gained ground over domestic cyclicals.

A net 54% (53% in March) said equities are undervalued, but only 8% are overweight on local equities. Overweight means managers assign a larger part of the portfolio to the asset.

A higher net 69% of managers (33% in March) said local bonds are undervalued, marking the 71st straight month of undervaluation in a row.

However, investors are neither overweight nor underweight on bonds, with many taking a neutral stance. Cash holds a similar neutral viewpoint.

Far more managers want to invest cash in South Africa, but no manager wants to increase cash levels.

Managers have returned to neutral from underweight on gold, positioning it near highs. The asset class has constantly reached record highs over the last year amidst global uncertainty.