South African stocks have proved immune to weakness shown in the country’s other asset classes this month and they mostly have rising metal prices to thank.
The mining sector represents about 40% of the benchmark equities index and gains in the likes of platinum and copper have spurred a rerating among producers of the commodities in October. The mining subgroup has risen 20% this month, led by a 49% surge in Royal Bafokeng Platinum after the company opened talks to be bought by Impala Platinum.
The sector’s strength has helped the FTSE/JSE Africa All Share Index advance 5.5% to date in a month that has been less kind to other asset classes. The rand has fallen 1.1% versus the US dollar, while the nation’s local-currency debt is down 1.2% in dollar terms. Sentiment towards both the currency and bonds has been soured by upcoming risks including a local municipal vote on November 1, finance minister Enoch Godongwana’s maiden medium-term budget speech on November 11 and a South African Reserve Bank rate decision due November 18.
Peter Takaendesa, head of equities at Mergence Investment Managers, is optimistic about the outlook for stocks. With metal prices set to remain “quite strong,” the index is likely to perform well into 2022, he said.