South African assets are experiencing a renewed interest from institutional investors, with a level of optimism at its highest in over a decade, according to a Bank of America Global Research survey published on Monday, June 22.
The survey, conducted with 14 fund managers between June 5 and 11, indicates that 93% of respondents believe that buying opportunities exceed selling opportunities, a level unseen since 2009. Allocations towards mining stocks are also at their highest level in five years.
The decline in energy prices is cited as the main factor improving sentiment. Oil has dropped by 29% in June compared to the peaks of May, helping to alleviate inflationary pressures.
In this context, net inflation expectations are at 7%, lower than the previous month, according to the survey.
Despite this decline, all fund managers surveyed anticipate an increase in the South African Reserve Bank’s (SARB) benchmark interest rates in the third quarter.
Deutsche Bank, on the other hand, believes that monetary tightening remains likely, while mentioning the possibility of a temporary pause in July if inflation expectations stabilize.
In the bond markets, 29% of fund managers consider South African 10-year bonds to be undervalued.
In the foreign exchange market, Deutsche Bank predicts a strengthening of the rand, with a USD/ZAR rate expected at 16.0 by the end of 2026, supported by the trade balance, restrictive monetary policy, and political stability.
