South African stocks posted to the best monthly gain since February 2014, as investors bought into companies earning revenue outside the country and mining stocks climbed.
The FTSE/JSE Africa All Share Index pared its April gain, declining 0.2 percent on Thursday after the Federal Reserve left open the possibility of raising interest rates in the second half. That might make emerging-market assets less attractive to investors seeking higher returns. The Johannesburg gauge rallied to a record high last week.
“There’s mixed feeling of unease about the strong performance and the level of the market that is so high,” Nerina Visser, a strategist and adviser at Johannesburg-based etfSA, said by phone on Thursday. “We certainly have had quite a good performance in the resources industry,” and stocks with exposure to international markets have pushed the index higher, she said.
Businesses including Cape Town-based Naspers Ltd., which has a stake in Asia’s second-largest Internet company Tencent Holdings Ltd., and paper maker Mondi Plc attracted buyers into an emerging market benefiting from U.S. interest rates at near zero. The index of 17 mining companies in the world’s biggest platinum producer jumped 7.9 percent as commodities advanced globally.
“The industrial stocks that have exposure to Europe, they have done very well,” Visser said. “Those are our large caps and they have certainly pushed the market higher.”
The main Johannesburg gauge rose 4.3 percent in the month to close at 54,440.43 on Thursday. The FTSE/JSE Africa Mining Index advanced 7.9 percent in April. Naspers shares reached a record high on April 13, ending the month 0.1 percent higher at 1,871.03 rand. Mondi advanced 3.5 percent in the month to 241.19 rand.
Foreign investors “have the ability to take that money and push into other parts of the world,” Ferdi Heyneke, a Johannesburg-based money manager at Afrifocus Securities, said by phone. “We have benefited from that.”
The South African bourse retreated along with developing nations that trimmed advances on the prospect of higher U.S. borrowing costs. The MSCI Emerging Markets Index fell 1.3 percent on Thursday, paring its April increase to 7.3 percent. The price-to-earnings ratio in Johannesburg is 21, compared with 14.4 times for the MSCI measure.
“The general feeling might be that the market is looking a bit expensive,” Heyneke said. “Generally everybody is keeping an eye on interest rates in America.”