JOHANNESBURG - South African assets are attracting fresh buyers as fears of stagflation fade, ​with fund managers increasing ⁠exposure to mining stocks to their highest levels in five ‌years, according to a survey released on Monday.

The Bank of America Global ​Research South Africa Fund Manager Survey conducted from June 5 to 11 among ​14 institutional investors highlighted ​a sharp recovery in market sentiment, with a net 93% of respondents identifying more buying than selling opportunities — the highest ⁠proportion since 2009.

OIL PRICES EASE INFLATION CONCERNS

A 29% drop in oil prices in June, compared to May peaks, has significantly reduced inflation pressures. That has seen a sharp turnaround from last month in forecasts, ​when a ‌net 75% of ⁠fund managers expected ⁠higher inflation, and 25% predicted an economic slowdown. In June, the economy reading ​fell to net zero, while inflation expectations collapsed ‌to just net 7%.

Despite easing inflation, all ⁠surveyed fund managers expect the South African Reserve Bank (SARB) to hike rates in the third quarter.

Deutsche Bank, in a separate note, said more tightening is likely, citing pipeline inflation risks and the possibility of an additional 50 basis points of hikes if oil prices rise again. However, there remains a chance the SARB could pause rate increases at its July Monetary Policy Committee meeting if inflation expectations remain ‌stable.

South African 10-year bonds remain attractive to investors, with ⁠a net 29% of fund managers viewing ​them as undervalued.

The rand is also expected to strengthen, with Deutsche Bank forecasting USD/ZAR at 16.0 by the end of 2026. The currency's outlook ​is supported ‌by a resilient trade balance, SARB's hawkish stance on ⁠inflation, and political stability domestically, ​the bank said.