South Africa Stocks Rise to Record as Rand Rout Boosts Miners

South African stocks rose, sending the benchmark index to a record high, as the world’s worst- performing currency this year boosted shares in mining companies that pay costs in rand and generate sales in dollars.

The FTSE/JSE Africa All Share Index (JALSH) advanced 0.1 percent to close at 40,652.96 in Johannesburg. Anglo American Plc (AAL), the country’s biggest mining investor, climbed 2.2 percent after saying it will write down $4 billion of the value of its Minas- Rio iron-ore project in Brazil, at the low end of market estimates, JPMorgan Chase & Co. said. BHP Billiton Ltd. (BHP), the world’s biggest mining company, jumped 0.9 percent.

The rand has declined 6.2 percent this year after Fitch Ratings downgraded the nation’s credit rating on Jan. 10 amid labor unrest in the mining and agricultural industries. Moody’s Investors Service and Standard & Poor’s cut the country’s rating late last year. The weaker rand boosts the value of shares in companies that earn part of their profit offshore.

“All these recent highs are definitely being driven by the weaker rand pushing the rand-hedge stocks up,” Greg Katzenellenbogen, a director of Sanlam Private Investments in Johannesburg, said by phone. “You have also seen a big turnaround in Anglo after the write-off.”

Capital expenditure for the Minas-Rio project will increase to $8.8 billion, if a risk contingency of $600 million is used in full, London-based Anglo said in a statement.

Anglo Rally

The cost increase is “lower than the market feared,” Fraser Jamieson, a London-based analyst at JPMorgan Securities Plc, wrote in a note to clients. “A $4 billion post-tax writedown is also toward the lower end of expectations.”

Anglo has advanced 5.2 percent this year after a 12 percent decline in 2012. Positive economic data out of China is boosting resources stocks, Katzenellenbogen said. The Johannesburg bourse may rise a further 15 percent this year if the rand remains weak, making dual-listed shares and other rand-hedge stocks attractive to local investors, he said.

The preliminary reading of China’s Purchasing Managers’ Index was 51.9 this month, according to a Jan. 24 statement from HSBC Holdings Plc and Markit Economics. That compares with a 51.5 final reading for December and the 51.7 median estimate of 17 analysts surveyed by Bloomberg News.

To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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