South African stocks declined for a ninth day in the longest stretch of losses since September 1998 on speculation the U.S. was moving closer to raising interest rates.
The FTSE/JSE Africa All-Share Index dropped 1 percent to 52,270.86 by the close in Johannesburg, bringing losses in May to 4 percent. That’s the biggest monthly decrease since June 2013. Emerging-market stocks retreated for the worst month this year as positive economic data in the U.S. boosted the odds for a tightening of Federal Reserve policy in the coming months, while Greek bailout talks stumbled.
“There’s a little bit of uncertainty around the dollar strength and concerns over Greece and concerns over valuations generally,” Simon Fillmore, chief executive officer of Independent Securities (Pty) Ltd., said by phone from Johannesburg. “It’s a culmination of many of those factors.”
The all-share index has gained 5 percent this year, pushing the gauge to 16.9 times estimated earnings and increasing the spread over the MSCI Emerging Markets Index, which is trading at a forward price to earnings ratio of 12.3, to the highest on record. The Johannesburg measure will return less than 10 percent this year and with valuations stretched, cash is a better investment choice, according to Stanlib Asset Management Ltd., which oversees the equivalent of $46 billion.
Sibanye Gold Ltd. dropped 24 percent in May, leading decliners for the month, followed by Harmony Gold Mining Co. and Gold Fields Ltd., which lost 23 percent and 21 percent, as the spot price of bullion fell to near a two-week low. Investors have cut holdings in gold-backed funds to their smallest levels in four months on bets of higher U.S. rates this year.
Equities in Africa’s most-industrialized economy have pulled back from a record high reached on April 24, when its relative-strength index rose to 71.6, above the 70 level that indicates to some traders a security or gauge is overbought. The RSI fell to 31.7 on Friday, the lowest since Oct. 15.
South African banks are among the most oversold stocks on the Johannesburg bourse, Fillmore said. The RSI six-member FTSE/JSE Africa Banks Index dropped below the 30 level for the first time since February 2014 on Friday as Standard Bank Group Ltd., Africa’s largest lender by assets, slipped 3.6 percent, while FirstRand Ltd. slid 2 percent.
The Bloomberg Commodity Index, a gauge of goods from metals to agriculture, retreated 3.3 percent in May for its fifth monthly decline. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, climbed about 1 percent this week, adding to last week’s 2.6 percent advance.