Bulls break into a trot, yet few are charging

Despite brighter global economic indications, asset managers remain suspicious about the prospects for financial markets, according to research by multi-manager Investment Solutions.

According to the February Asset Manager survey, which gauges the views of 14 top-ranked asset managers, 70% of the experts surveyed were "mildly bullish" on the FTSE/JSE All Share index. They expect it to end 2010 between 30000 and 33000 points. (This week the index has been floating around 26600.)

"Ten percent of managers were 'neutral', expecting the index to finish 2010 between 27000 and 30000, while 10% are 'mildly bearish', expecting it to end between 24000 and 27000," said Keegan Edwards, an economist at Investment Solutions.

"This is in sharp contrast to our finding from the same survey six months ago when only 30% of fund managers were 'mildly bullish'," she said.

"We know there is money out there waiting to come into the markets but with valuations quite high there is an understandable hesitancy among fund managers."

Looking at international markets, 60% of fund managers were "mildly bullish" on the S&P500 index, expecting it to see out the year between 1200 and 1300. (The index was at around 1100 this week.) Some 50% are "mildly bullish" on the FTSE100, expecting it to close the year between 6000 and 6500. (It was at 5140 on Friday.)

When it comes to the rand, no fund managers are bullish.

"This is one area where people have a clustering of views. Ninety percent of those surveyed were 'mildly bearish' on the rand's 2010 prospects, expecting it to see out the year between R7.50 and R8.50 to the US dollar," said Edwards.

"And 10% of managers were neutral, forecasting the rand in a R7 to R7.50 range against the greenback. No one is bullish." (The exchange rate was R7.70/$ on Friday.)

Fifteen percent of managers were "highly bullish" on SA's growth prospects, expecting GDP growth of more than 3% for 2010. Seventy percent were "mildly bullish", seeing growth at between 2% and 3%, while the remaining 15% were "neutral" with 1% to 2% growth expectations.

Said Edwards: "In the same survey six months ago 100% of managers were bearish on SA's growth prospects, with GDP expectations of less than 1.5% for 2009. Fund managers clearly expect a much improved year on the economic front."

When it came to commodities, the gold bulls were hard to find, despite much speculation on gold's prospects for 2010.

Ten percent of those surveyed were "highly bearish", expecting gold to close 2010 at less than $1000/oz, 20% of the managers were "mildly bearish" (between $1000 and $1100/oz) and 50% were "neutral" (between $1100/oz and $1200/oz).

Twenty percent were "mildly bullish", with an expectation of between $1200/oz and $1300/oz for year-end. Gold was trading at $1078/oz on Friday.