South African shares rose, ending a record streak of losses, on speculation the decline was overdone and gains in companies such as Anglo American and BHP Billiton helped counter weakness across most equities.
The FTSE/JSE Africa All Share Index climbed for the first time in 11 days, increasing 0.2%, as 57 shares advanced, 107 dropped and five were unchanged. Anglo American, which accounts for almost 4% of the measure, added 4.9%, while Billiton, which makes up 8% of the index weight, climbed 1.8%.
The measure’s 14-day Relative Strength Index earlier Tuesday fell below the 30 level that some traders take as a sign that shares are poised to increase. The All-Share had slumped 4.2% over the prior 10 days as investors debated the timing of US interest-rate increases, damping demand for riskier assets, and as the outlook for the continent’s most industrialized economy dimmed with rising joblessness and slowing growth.
“Over the next couple of days, the market is likely to correct out of this oversold position,” Neels Heyneke, a technical analyst at Nedbank Group in Johannesburg, said by phone.
While the All-Share rebounded, bonds retreated, driving yields to eight-month highs and the rand weakened. Rand-denominated bonds due December 2026 rose four basis points to 8.30%, the highest since October 3. The local currency dropped 0.1% to 12.2490 per dollar.
Power shortages are hampering South Africa’s ability to recover from the slowest expansion since the 2009 recession, keeping unemployment at an 11-year high. At the same time, new taxes on gasoline, government wage increases above inflation, the rand’s declines and the prospect of higher electricity tariffs are fueling price gains, increasing the chances of the first interest-rate increase since July 2014.
South Africa has “no growth and we’re actually going nowhere very fast,” Alec Abraham, a senior equity analyst at Johannesburg-based Sasfin Securities, said by phone. “Investors are starting to really discount emerging markets, and primarily South Africa because it’s just not showing its potential.”
Equities in Africa’s most-industrialized economy have pulled back from a record high on April 24 on speculation the US is moving closer to raising interest rates. The All-Share index is trading at a record premium over the MSCI Emerging Markets Index, based on estimated earnings over the next 12 months, after rallying almost 50% over the prior three years.
Growth in the continent’s largest economy after Nigeria slowed to an annualised 1.3% in the first quarter from 4.1% in the previous three months, the statistics office said on May 26. The unemployment rate climbed to 26.4% from 24.3%, Statistics South Africa said.
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