The reception area of the Johannesburg Stock Exchange. File picture: Leon Nicholas

Johannesburg - South Africa's stock market is set to gain 4 percent between now and the end of the year, benefiting from still ample global liquidity and confidence in the outlook for well managed local blue chips, a Reuters poll found.

The poll of 10 analysts taken in the past week predicted the Johannesburg Top-40 index would end the year at around 47,200. It closed at 45,383 on Wednesday.

“It is going to be an improving global economy, investors wanting to be exposed to well-organised companies that are growing profit margins,” said Paul Theron, chief executive officer of asset manager Vestact.

“I expect bonds and cash in general to deliver very poor returns, so the only way to make a sustainable return is to be in equities,” he said.

South Africa's economy is struggling in the face of a slowdown in demand for commodities and labour strikes in its mining sector among other factors, but some of its top companies are benefiting from expansion overseas.

“It has nothing to do with South African dynamics,” said Owen Nkomo, executive partner at Inkunzi Investments, who expects the Top 40 to rise to close to the 50,000 mark in a year.

“We are past that stage where we are looking at countries separately. Investors are saying I want high yield in stocks, so where do I go? I go to the emerging markets.”

A weak South African rand in the last two years has supported South African companies that trade overseas.

The rand is expected to trade at around 10.6250 per dollar around this time next year, roughly where it is now.

The Johannesburg Top-40 index has more than doubled in value from five years ago as the US Federal Reserve has pumped trillions of dollars into markets to stimulate the world's largest economy.

While analysts consider the index to be already overvalued, the poll forecast it would still reach 48,967 by this time next year as the global economy improves.

There is the risk of a pullback later this year, however, when the Federal Reserve, which has been tapering its stimulus programme, ends it altogether.

“The day the US stops supporting the US market with paper printed money, that is the day you can expect global markets to fall,” said Nkomo. - Reuters