Local stocks set to snap back from 2020 losses

The South Africa benchmark index has bounced back after heavy losses earlier this year
The South Africa benchmark index has bounced back after heavy losses earlier this year
Supplied

South Africa’s benchmark equities index is set to erase its 2020 drop, staging a spectacular snap-back from its March trough following a surge in shares of market heavyweight Naspers and a stellar performance by gold miners.

The FTSE/JSE Africa All Share Index gained as much as 2% on Tuesday and has climbed more than 50% from its March 19 low to be 0.6% higher for the year on an intraday basis. South African stocks have outpaced developing-nation peers, with the MSCI Emerging-Markets Index still down 3% for 2020, while the Stoxx Europe 600 Index remains down by about 9%.

The enormous rally has been fuelled by hopes of a vaccine, but primarily by global central banks stepping up
Henre Herselman

Naspers has contributed most to the rebound, with the tech investor up 44% this year as the Covid-19 lockdown increased demand for online services provided by Chinese internet giant Tencent, in which the Cape Town-based company holds a 31% stake.

The gains in the benchmark index have little to do with confidence in the local economy and more with a wave of stimulus from major global central banks that has spurred investor demand for riskier assets. South Africa’s Treasury forecasts that gross domestic product will contract 7.2% in 2020, the most in almost nine decades, due to the coronavirus pandemic and restrictions put in place to curb its spread.

“The enormous rally has been fueled by hopes of a vaccine, but primarily by global central banks stepping up, providing almost unbelievable stimulus packages and reassuring markets that they are here to provide liquidity,” said Henre Herselman, a derivatives trader at Anchor Private Clients.

Read: Move Eskom debt to state balance sheet, says ex-Goldman head

An index of South African gold producers has more than doubled this year as bullion closes in on its all-time high set in 2011. Investors have piled into the haven asset at a time of deeply negative real interest rates and geopolitical risks.

“The recovery in the South African market has largely been driven by heavyweight industrial and resources shares,” Herselman said. “The search globally for yield, as global interest rates are at record lows has filtered into the bond market, but not the South Africa-focused shares broadly speaking.” – Bloomberg


facebook
twitter
linkedin
instagram

Delivering the 

news you need

+27 11 713 9001
news@citypress.co.za
www.citypress.co.za
69 Kingsway Rd, Auckland Park
We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24

E-Editions

Read the digital editions of City Press here.
Read now
Voting Booth
ANC secretary-general Ace Magashule has written a letter suspending party president Cyril Ramaphosa in apparent retaliation after he was served with a letter of suspension on Wednesday.
Please select an option Oops! Something went wrong, please try again later.
Results
He doesn't have the power
28% - 24 votes
It’s a declaration of war
24% - 21 votes
Nothing but a distraction
48% - 42 votes
Vote