ArcelorMittal South Africa Rises: Johannesburg Mover

ArcelorMittal South Africa Ltd. had the biggest two-day rally and rose the most in almost four years in Johannesburg trading on speculation that a drop to the lowest level since 2003 was overdone.

The shares in Africa’s biggest steelmaker climbed 8.5 percent to 30.48 by 1:57 p.m. in the city, taking its increase over two days to 20 percent, the most for the same period since Nov. 28, 2008. The stock had fallen for 12 consecutive days through Nov. 20, when the company announced Matthias Wellhausen would replace Rudolph Torlage as chief financial officer. The 14-day relative strength index on the stock was below 30 from Nov. 7 to Nov. 20. A reading below that level is a signal to technical analysts that the price is poised to appreciate.

“It was oversold and now the market realizes that,” Mohamed Kharva, an analyst with Nedbank Securities, said in a phone interview. “People overreacted to the CFO announcement.”

Torlage will now “focus on projects of a strategic nature,” the company said on Nov. 20. The stock fell to the lowest level since November 2003 on the same day.

ArcelorMittal has agreed to sell its 50 percent interest in Kalagadi Manganese Ltd. for $447 million to Daphne Mashile-Nkosi, its South African partner in the producer of the steelmaking ingredient, the company said Nov. 15. The companies were in dispute over ArcelorMittal’s shareholder obligations.

Opportunistic Buying

“The stock got hammered when the CFO was replaced, plus many steel businesses around the world have tanked,” Campbell Parry, an equity analyst at Investec who has a sell recommendation on the stock, said in an e-mailed response to questions. “It’s probably worth around 30 rand so this is opportunistic buying.”

ArcelorMittal South Africa has retreated 56 percent this year. Posco, Asia’s third-largest steelmaker, has declined 19 percent.

The South African company’s 30-day historical volatility, a measure of stock swings, increased to 58 today, the highest since April 2010. The FTSE/JSE Africa All Share Index’s 30-day volatility measure was at 9.2 compared with 8.9 yesterday. A higher reading means an asset’s price can have bigger moves. More than 52,000 shares have traded, or 95 percent of the daily average over the past three months.

(Corrects to show ArcelorMittal and not ArcelorMittal South Africa agreed to sale in fifth paragraph of story published yesterday.)
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