South African Stocks Rebound From 3-Month Low on Oversold Signal

Updated on
  • All share index gains most in more than six weeks on Monday
  • Relative strength index fell to the lowest since June 4

South African equities gained the most in six weeks amid signals stocks were oversold after dropping 4.6 percent last week.

The benchmark FTSE/JSE Africa All Share Index gained 1.2 percent to 49,860.74 by the close in Johannesburg on Monday, the most since Oct. 23. The gauge’s relative strength index, a measure of price momentum used by some investors to identify when a security has fallen or risen too far, dropped to 26.7 on Friday, the lowest since June 4. A reading below 30 typically indicates that a security or index may be due for a rebound.

“Nothing ever falls in a straight line forever; that’s probably the single biggest reason,” for the advance, Wayne McCurrie, a portfolio manager at Momentum Wealth Pty Ltd., said by phone from Johannesburg. “‘It’s probably due some rebound.”

Lewis Group Ltd. lead gains, rising 8.8 percent after its RSI fell to as low as 22.4 last week. Harmony Gold Mining Ltd climbed 5.3 percent after a 2.7 percent surge in the price of the metal last week, while Netcare Ltd. added 4.6 percent.

Stocks may remain volatile in coming weeks amid uncertainty about the outlook for commodities, which account for more than 50 percent of South Africa’s exports, McCurrie said. The Bloomberg Commodities Index fell 1.5 percent on Monday after rising last week for the first five-day gain since Oct. 9. The gauge is down 23 percent this year.

“The real thing that will cause volatility is what is going to happen to commodity prices,” McCurrie said. “That’s the real unknown at the moment. Will there be some recovery in prices, or will they just continue to fall?”

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