South Africa Stocks Extend Record as Stimulus Hopes Boost Miners

(Bloomberg) -- The main South African stock index extended its advance to a fourth day, adding to Wednesday’s record close and tracking moves in most Asian markets amid expectations that U.S. President-elect Joe Biden has a clearer path to boosting fiscal stimulus after key elections.

The FTSE/JSE Africa All Shares Index rose 0.6% as of 10:42 a.m. in Johannesburg. An index of mining stocks advanced for a fourth day to an all-time high, with diversified giants BHP Group Plc, which gained 2%, and Anglo American Plc, up 1.3%, contributing the most points to the broader benchmark. Platinum producers extended their rally, led by Anglo American Platinum Ltd.’s surge of as much as 5.1%.

The Democrats’ victory in two key Georgia runoffs gives them control of the U.S. Senate and has reignited the so-called reflation trade that bets on a global recovery from the pandemic. That helped encourage risk-on sentiment in Johannesburg, offsetting local news including South Africa’s record number of new Covid-19 cases and a fresh round of electricity cuts.

Banks were also prominent among gainers, with FirstRand Ltd. up 1.7% and Standard Bank Group Ltd. rising 1.3%. An index for the sector advanced for a second day, climbing 1.5%.

Weakness in tech investor Naspers Ltd. and its unit Prosus NV curbed gains in the broader benchmark after reports that the Trump administration may bar investments in China’s two most valuable companies, Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Naspers, which holds a 31% stake in Tencent through Prosus, fell 1.2% as its subsidiary retreated 1.7%. Tencent slid 4.7% in Hong Kong.

“The JSE is following the U.S. playbook, looking through the virus second wave to stimulus hopes with Democrat control of the Senate,” said Tom Gale from Standard Bank’s equities trading desk. “A steeper U.S. yield curve is helping boost banks and commodities and that’s feeding through here. Tech is out of favor on rising anti-trust risk and U.S.-China tension, and that helps fuel rotation from last year’s winners to losers.”

South African stocks’ charge to all-time highs has triggered a signal that the rally may be overdone. The 14-day relative strength indicator on the benchmark index has climbed beyond 70, a level regarded by some analysts as warning that the market may have risen too rapidly and be poised for a retreat.

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