South African investors have been caught up in a dramatic contrast in the first half of 2019: a stumbling economy, but a stock market that raced to its best start in 12 years.<\/p>\n
Even as the economy endured its worst contraction in a decade in the second quarter, the Johannesburg Stock Exchange\u2019s benchmark index was charting gains that have reached 10% by the end of June.<\/p>\n
That\u2019s largely thanks to global demand for materials and to investors seeking havens in precious metals in uncertain times.<\/p>\n
\u201cThe JSE and its performance is not a reflection of the state of the South African economy; it just reflects the nature of the stocks that are listed on the market, the majority of which predominantly sell in US dollars,\u2019\u2019 Olwethu Notshe, portfolio manager at Sentio Capital, said by phone.<\/p>\n
\u201cThe South African economy itself is not doing well and that is evident from the performance of S.A. Inc. stocks, like the banks and retailers.\u2019\u2019<\/p>\n
An index of platinum companies has outshone all other sectors, surging more than 60% as miners enjoy bumper prices for the palladium and rhodium they extract alongside their main product.<\/p>\n
Gold miners are up 46%, reflecting bullion prices at six-year highs. More broadly, mining companies which account for a quarter of Johannesburg\u2019s market value, have gained almost 30%, on pace for the best year since 2016.<\/p>\n
With the South African currency vulnerable to the vagaries of global trade tensions and emerging-market volatility, many of the equities traded in Johannesburg offer an enticing zone of shelter for investors.<\/p>\n
\u201cBecause the rand is a risk asset, if we get increased trade tensions and negative news, we will see rand softness, and with 70% of the JSE being rand hedges, we may see the stock market remain elevated,\u2019\u2019 Notshe said.<\/p>\n
Naspers, MTN<\/strong><\/p>\n Market giant Naspers Ltd, which accounts for 19% of the main index, contributed the most points to the benchmark\u2019s advance as it climbed 22%. The second half will see Naspers listing Prosus NV, the vehicle for its international assets, in Amsterdam.<\/p>\n That will chip away at the skewed valuation of the media and internet group, which the market puts at less than its 31% stake in Tencent Holdings Ltd.<\/p>\n \u201cThe silver bullet that will resolve this is when they start to unbundle all the other unlisted assets in Prosus,\u201d Notshe said. \u201cFor example, they can unbundle the classified business, since that has broken even already and the subsidiary can stand on its own.\u201d<\/p>\n MTN posts best quarter since 2010 after Nigerian listing<\/strong><\/p>\n MTN Group Ltd, the fifth-biggest driver of the South African market\u2019s gains, was buoyed by the May listing of its Nigerian business, a breakthrough in easing sometime fractious relations with regulators in the continent\u2019s most-populous country.<\/p>\n MTN has gained 25%, on course for its best year since 2013.<\/p>\n \u201cThe listing of MTN in Nigeria now means that Nigerian pension funds will own part of the company, so when the regulator hands out sanctions, they will be handing out those sanctions on their own pension fund members, and we think this will act as a deterrent to that, and will therefore be positive for MTN,\u201d Notshe said.<\/p>\n
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