South African commodity stocks found favour with foreigners while local players snapped up financial shares by midsession on Monday as a weak dollar boosted metal prices and the rand, traders said.
”Emerging markets do seem to be finding favour,” said one fund manager, adding that South African equities were benefiting as foreign fund managers, underweight in emerging markets, upped their exposure as bigger markets performed poorly.
South Africa’s all-share index, dominated by natural resource stocks, has rocketed to a series of life highs since the end of the last year, fed by strong commodity prices and a weak rand. At 1124, the index was one percent higher at 11,252.
The rand surged to a best level for five months against the dollar on Monday of 10.35 and was trading at 10.37 by 1128 GMT.
Commodity counters, which make up over half the value of the overall market, usually benefit when the rand weakens as they pay costs in rand and draw a large chunk of earnings abroad.
But dollar weakness and poor stock performances on Wall Street have increased foreign appetite for local markets, helping to offset rand strength.
Those in the limelight on Monday included gold producers AngloGold, which nudged 0.4 percent higher to 611.60 rand, and peer Gold Fields, which shuttled to 132.20 rand, up 2.6 percent.
AngloGold parent, which accounts for just over 13 percent of the bourse, climbed 1.7 percent to 171.20 rand.
Other rand-hedges shrugging off the firm rand included pulp and paper group Sappi, which glued on a 1.5 percent gain to 137 rand ahead of second quarter earnings on Tuesday.
Synthetic fuel firm Sasol swept 1.6 percent higher to 118.20 rand, helped by strong oil prices.
Bank shares reaped the reward of the latest rand gains as investors anticipated an easing in inflationary pressures and looked forward to lower interest rates in the longer-term following two rate hikes so far this year.
”Domestic institutions are overweight resources but underweight financials so you could see increased appetite for financials at home,” said one trader.
Standard Bank, the country’s biggest bank by market value, bounced to 37.20 rand, up 1.6 percent. Absa skipped up 3.6 percent to 34.50 rand and Nedcor trotted up to 151.80 rand, up 2.6 percent.
Nedcor’s gains have pushed the value of its offer for number six bank BoE to 3.53 rand from the original 3.43 rand per share basic cash-and-paper offer announced last Monday.
BoE was trading at 3.53 rand.
Number two bank FirstRand climbed 1.9 percent to 8.50 rand as the market mulled its Friday announcement that the National Treasury had given its approval in principle to a deal over a rescue package to save Saambou.
Saambou’s shares have been suspended since February.
But retail JD Group limped 4.8 percent lower to 15.90 rand after reporting disappointing interim results. The group said headline earnings per share fell 37 percent compared to the same period a year before because of tough market conditions in the durable goods credit retail sector.
Traders said they expected thin volume throughout the day as UK and Japanese stocks markets were closed for a public holiday. – Reuters