Johannesburg Stocks’ Monthly Gains Are Longest in Two Years

  • Rand-hedge companies drive South African benchmark higher
  • Technical indicator earlier showed index near overbought level

Johannesburg stocks posted the longest stretch of monthly advances in almost two years as shares in companies that benefit from rand weakness drove the South African benchmark index higher during May.

The FTSE/JSE Africa All Share Index advanced for a fourth month, the longest such sequence since July 2014. The benchmark closed 1 percent lower at 53,905.21 Tuesday, paring the gain for May to 1.8 percent.

Naspers Ltd., which rose to a record Tuesday, SABMiller Plc, and Cie Financiere Richemont SA, all so-called rand-hedge stocks, collectively make up 32 percent of Johannesburg’s benchmark index, according to data compiled by Bloomberg. The rand has weakened 26 percent against the dollar since the start of last year, more than any emerging-market currency, aside from the Argentine peso.

“It’s a bit of a false rally in that our overall market still isn’t really performing,” said Vunani Private Clients money manager Michele Santangelo. “Some of the really heavyweight dual-listed stocks, which are pure rand hedges, are rallying off the back of a weak rand in May.”

The All Share Index’s 14-day relative strength index earlier climbed to 69.5, near the 70 level that indicates to some technical traders that the gauge is overbought and is poised to fall. The RSI was at 61.4 by the close. The rand reversed earlier declines to trade 0.5 percent stronger at 15.7321 per dollar, paring its drop this month to 9.6 percent, the biggest slump since May 2013.

The rally in Johannesburg stocks will be prolonged if rand weakness continues, according to Vunani’s Santangelo. The near-term outlook for the currency may hinge on the outcome of S&P Global Ratings’ review of South Africa, expected on June 3, he said.

“Perhaps on Friday we’ll see what Standard & Poor’s has to say -- if they push us out and they don’t downgrade us and they give us a little bit more time, then you’ll be able to see the rand come back a bit,” Santangelo said.

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