The latest Merrill Lynch fund managers' survey for South Africa shows that a net 59 percent of managers think the country's economic situation will worsen over the next 12 months from 75 percent last month.

On balance, managers expect the equity market to be down/flat in three months and up in six months, but equity bulls on a 12-month view declined considerably to 24 percent in June from 44 percent in May.

However, a net 88 percent of managers believe a recession is unlikely. A lower 24 percent feel monetary policy is too restrictive from 38 percent a month ago, while the repo is forecast at 12.5 percent in 12 months.

The rand is seen at 8.49 per dollar in 12 months from an 8.19 12-month forecast last month, while the 10-year bond yields is seen at 10 percent in 12 months (currently 10.4 percent).

Net bond bears were at –59 percent from –56 percent last month, but cash bulls spiked to another survey record of 53 percent from 44 percent last month.

Managers are now less bearish on commodities over 12 months at –18 percent from -25 percent before.

On a net basis, managers continue to think the equity market is overvalued, though less so than last month at 12 percent from 19 percent before. However, managers see less buys with the buy-to-sell ratio at 3:1 from 4:1 last month.

Those saying it was fairly valued measured 65 percent from 81 percent in May, while –35 percent see more sells than buys from –38 percent before.

More managers (71 percent from 56 percent) expect lower 12-month core inflation due to higher base effects.

The majority of managers expect a 0.5 percent reduction in GDP growth per annum over five years, due to power shortages.

I-Net Bridge