SIM Index: SA investor confidence 'slightly less negative' - Month survey reveals institutions remain nervous

According to the Sanlam Investment Management Investor Confidence Index – a monthly survey of South African investor sentiment - the last month has produced only a marginal improvement in the overall confidence levels of institutional investors, financial planners and advisors. In results released today, three of the four indices which make up the index improved slightly, indicating a slight abatement of the discomfort and nervousness clearly evident in the December 2007/January 2008 results. Views on the one-year prospect for investments among institutions, however, have dipped again to their second lowest levels since the index was introduced in June 2007.

Frederick White, head of research at SIM, the asset manager within the Sanlam Group, said that the confidence among institutional investors could best be described as ‘less negative’ rather than ‘more positive’. “Institutions still expect negative returns over one and three months and returns of around zero over the six month period. Most significantly, over the next year, institutional investors anticipate only 2.3 percent returns.”

“We suspect that the very strong run by the resources sector recently, which outperformed the FINDI by nearly 20 percent and which retains a large influence on the All Shares Index, combined with the increasing probability of a US recession and a growing question about the uncoupling of emerging markets from the developed markets, could have raised investors’ concerns about the outlook for returns.”

White said that investors are also conscious that uncertainties caused by political changes and the power crisis are influencing offshore investors’ appetite for South African investments. “Foreign investors are likely to remain cautious into early 2009 in the build-up to the general elections and institutional investors will be aware of this.”

Financial planners and advisors, on the other hand, seem to believe that the worst may be over and that the equity markets might start to improve over the next month or so. “There is still some concern around one-month returns and optimism about buy-on-dips has only increased slightly, however on all longer time periods prospects are believed to be better. On a six and 12-month basis, the bulk of respondents expect positive returns for the market. On fundamental valuation, this group now, on average, thinks that the market is marginally cheap.”

The SIM Investor Confidence Index was launched in conjunction with the Institute of Behavioral Finance to survey the sentiment of South Africa’s equity investors. As an anonymous survey, it is conducted among 80 to 120 financial intermediaries and fund managers – both independent and from investment houses.