South African Retail Stocks Gain to Post Second Monthly Advance

South African retail stocks gained, rising for a second month, on bets the Federal Reserve will maintain stimulus that boosted emerging markets and as investors shrug off slowing growth in the continent’s largest economy.

The 11-member FTSE/JSE Africa General Retailers Index advanced 1.4 percent to 67,703.35 by 3:09 p.m. in Johannesburg, bringing its gain since reaching a 15-month low on Aug. 28 to 21 percent. That’s the best performance among the Johannesburg Stock Exchange’s major indexes in the period, according to data compiled by Bloomberg. The measure is up 6.5 percent this month, compared with a 3.1 percent increase in the all-share index.

The Fed will probably wait until March to reduce the $85 billion in monthly asset purchases in the U.S., according a Bloomberg survey of economists this month. Bond buying pushed borrowing costs on Treasuries lower and fueled investor demand for higher-yielding assets in places such as South Africa. The U.S. central bank will announce its latest monetary-policy decision on Thursday. The MSCI Emerging Markets Index advanced 0.5 percent, heading for its second monthly gain.

“Emerging markets in general are coming back into vogue, at least while tapering is put on the back burner,” Chris Gilmour, an analyst at Barclays Plc unit Absa Asset Management Private Clients, said by phone from Johannesburg. “For the next few months, we would probably see interest in these retailers.”

Bond Yields

The rally in retailers is “a play on what’s happening in global markets and bond yields,” Diane Laas, an equity analyst at Investec Asset Management, which manages the equivalent of $105 billion, said by phone from Cape Town. “The yields in emerging markets came down significantly and emerging-market retailers ran at the same time.”

South African 10-year bonds have returned 7.1 percent since the retailer’s index rebounded from the Aug. 28 lows, with yields dropping 78 basis points over the period to 7.54 percent.

Retailers in the country are struggling with declining consumer spending with economic growth estimated at grow at 2 percent this year, the worst pace since the 2009 recession, according to the central bank.

Shoprite Holdings Ltd. (SHP), the continent’s largest grocer, rose 0.7 percent to 181.99 rand, heading for its highest close in 3 1/2 months. The company said today third-quarter sales growth rose compared with the three months to June.

Mr Price Group Ltd. (MPC), a clothing seller, rose to a record, advancing 2.7 percent to 156.72 rand. The shares are the best performer among the retail stocks this month.

To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net

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

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