Following the Reserve Bank’s latest decision to hold rates this week, Bank of America Merrill Lynch has published a new investor survey describing how foreign investors see the South African market over the next 12 months.<\/p>\n
According to the report, wealth managers generally expect a weaker rand, higher bond yields and a slightly higher repo rate in the next 12 months.<\/p>\n
While the overall view is that South Africa’s economy is expected to improve over the period, key concerns remain – specifically the country’s weak earnings backdrop, which was identified as the biggest domestic risk, followed by questions hanging around land reform.<\/p>\n
Other issues that are stunting economic growth include a volatile rand, weak consumer spending, lack of skills, high levels of unemployment, and shifting policies, Merrill Lynch said.<\/p>\n
Most have taken a wait and see approach towards local asset and equity allocations, with fewer (less than half) being comfortable with the pace of reform under new president, Cyril Ramaphosa.<\/p>\n
The South African Reserve Bank\u2019s monetary policy committee on Thursday voted to keep the repo rate unchanged at 6.5%, with a base home loan rate of 10%.<\/p>\n
However, the central bank\u2019s governor Lesetja Kganyago revised the country\u2019s expected GDP growth for 2018\u00a0to 1.2% from a previous estimate of 1.7%.<\/p>\n
While the rate hold was largely anticipated, the downward review of the growth rate caught many by surprise.<\/p>\n
The rand weakened on Thursday on the clear warnings from the central bank that risks to inflation were rising and the outlook for economic growth had worsened, which ultimately extended a selloff from earlier in the session.<\/p>\n
Rand<\/strong><\/p>\n The 12-month rand forecast weakened further to R13.98\/US$, compared to R13.38\/US$ forecast in June.<\/p>\n Repo rate<\/strong><\/p>\n Managers\u2019 repo forecast over the next 12 months increased to 6.8%, compared to (6.65% last month). Managers also expect a repo hike sooner rather than later, with most expecting it to hit in the second quarter of 2019 – though some anticipate it as soon as the last quarter of this year.<\/p>\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2018\/07\/Rand-predictions.png\")
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