Johannesburg stocks set for biggest monthly gain in two years

Tuesday’s gains led by Naspers, British American Tobacco and Standard Bank Group.

Johannesburg stocks rose for a sixth day, the longest stretch of advances since May 2014, as shares in companies that benefit from rand weakness drove the South African benchmark index higher.

The FTSE/JSE Africa All Share Index climbed 0.1% to 54 514.58 as of 10:05am, extending the gain for May to 2.9%. The index is poised to advance for a fourth month, the longest such sequence since July 2014. Tuesday’s gains were led by Naspers, the continent’s biggest company by market value, which rose to a record. British American Tobacco and Standard Bank Group were among other stocks contributing most to the increase in the benchmark.

Naspers, SABMiller, and Cie Financiere Richemont, all so-called rand-hedge stocks, collectively make up 32% of Johannesburg’s benchmark index, according to data compiled by Bloomberg. The rand has weakened 26% 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 climbed to 69.5, near the 70 level that indicates to some technical traders that a security is overbought and is poised to fall. The rand declined 0.3% to 15.8547 per dollar, extending its drop this month to 10%, the biggest slump since May 2013.

The rally in Johannesburg stocks will be sustained if the 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.

© 2016 Bloomberg

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