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Johannesburg’s Biggest Stocks Suffer Worst May in Decades

Johannesburg’s Biggest Stocks Suffer Worst May in Decades

(Bloomberg) -- If you’re looking for evidence of South Africa’s faltering economy, the performance of shares in its biggest companies is a good place to start.

Johannesburg’s FTSE/JSE Top40 Index of the largest companies by market capitalization had slumped 7.3% this month as of Tuesday’s close. That leaves the gauge on track for its worst May in 20 years.

Johannesburg’s Biggest Stocks Suffer Worst May in Decades

South Africa’s economy probably contracted an annualized 2% in the first quarter, Bank of America analysts said this week. Investors are awaiting evidence that President Cyril Ramaphosa, who is still to name his cabinet after the African National Congress won the election three weeks ago, will be able to lead a revival of the continent’s most industrialized economy.

“Skepticism around the time line required to affect structural change to the SA economy is weighing on investors,’’ says Warwick Bam, head of research at Avior Capital Markets. “Improvements in education and productivity remain barriers to sustainable long-term growth.’’

To make things worse, foreign investors reduced their holdings of some major South African companies Tuesday as MSCI Inc. reduced the country’s weighting in its emerging-market equity gauges. That prompted a record 13.3 billion rand ($893 million) in outflows.

In fairness, South African stocks are still having a slightly better month than their emerging market peers, which have suffered as the trade war between the U.S and China batters sentiment. MSCI Inc.’s benchmark index for developing country stocks had lost 8.4% in May before trading started Wednesday.

To contact the reporter on this story: Adelaide Changole in Nairobi at achangole2@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Celeste Perri

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