South African retail stocks gained on Monday, rising for a second month, on bets the Federal Reserve will maintain stimulus that boosted emerging markets and as investors shrug off slowing growth in the continent’s largest economy.
The 11-member FTSE/JSE Africa General Retailers Index advanced 1.4% to 67 703.35 by 3.09pm in Johannesburg, bringing its gain since reaching a 15-month low on August 28 to 21%. That’s the best performance among the Johannesburg Stock Exchange’s major indexes in the period, according to data compiled by Bloomberg. The measure is up 6.5% this month, compared with a 3.1% increase in the all-share index.
The Fed will probably wait until March to reduce the $85-billion in monthly asset purchases in the US, according a Bloomberg survey of economists this month. Bond buying pushed borrowing costs on Treasuries lower and fueled investor demand for higher-yielding assets in places such as South Africa. The US central bank will announce its latest monetary-policy decision on Thursday. The MSCI Emerging Markets Index advanced 0.5%, heading for its second monthly gain.
"Emerging markets in general are coming back into vogue, at least while tapering is put on the back burner," Chris Gilmour, an analyst at Barclays unit Absa Asset Management Private Clients, said by phone from Johannesburg. "For the next few months, we would probably see interest in these retailers."
The rally in retailers is "a play on what’s happening in global markets and bond yields," Diane Laas, an equity analyst at Investec Asset Management, which manages the equivalent of $105-billion, said by phone from Cape Town.
"The yields in emerging markets came down significantly and emerging-market retailers ran at the same time."
South African 10-year bonds have returned 7.1% since the retailer’s index rebounded from the August 28 lows, with yields dropping 78 basis points over the period to 7.54%.
Retailers in the country are struggling with declining consumer spending with economic growth estimated to grow at 2% this year, the worst pace since the 2009 recession, according to the central bank.
Shoprite, the continent’s largest grocer, rose 0.7% to R181.99, heading for its highest close in 3 1/2 months. The company said today third-quarter sales growth rose compared with the three months to June.
Clothing retailer Mr Price rose to a record, advancing 2.7% to R156.72. The shares are the best performer among the retail stocks this month. – Bloomberg