ArcelorMittal South Africa Ltd. (ACL), the continent’s largest steelmaker, gained the most in six months, capping a seven-day rally after Bank of America Corp. recommended buying the stock.
The shares rose 10 percent, the most since Nov. 21, to 32.11 rand by the close in Johannesburg. About 1.5 million shares, or 1.7 times than three-month daily average, changed hands.
Bank of America raised its recommendation on the stock to buy from neutral and increased its price estimate to 46 rand from 31 rand, citing the company’s target for earnings within three years.
“While we remain cautious on the pace of recovery in South Africa construction, we believe ArcelorMittal South Africa has done a good job at addressing key investor concerns,” analysts, including Andrew Snowdowne in Johannesburg, wrote in a report dated today. A weaker rand may lead to “significant” upgrades, they said.
The company is “highly leveraged” to a weak rand, with 55 percent of its costs in the local currency, analysts at Bank of America said. Sales abroad accounted for 20 percent of the steelmaker’s revenue in 2011, according to data compiled by Bloomberg.
While the stock has climbed 42 percent from an almost 10-year low on April 29, the rand has tumbled 9.3 percent in the past month, the worst performer among 16 major currencies tracked by Bloomberg.
“ArcelorMittal (MT) South Africa is having a tremendous run,” Ryan Wibberley, head of equity dealing for frontier and emerging markets at Cape Town-based Investec Asset Management, said in an e-mailed response to questions. “It began last week when the market began to price in the steel manufacturer’s oversold position, particularly in light of the weakening rand.”
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