Johannesburg\u2019s benchmark stock index is heading for its worst month in almost two decades, reeling from a double hit as the Iran war saps demand for emerging-market assets while plunging precious-metal prices weigh on the country\u2019s miners.<\/p>\n\n\n\n
The FTSE\/JSE All Share Index was down 14% in March, on track for its biggest monthly decline since the height of the global financial crisis in September 2008, according to data compiled by Bloomberg. <\/p>\n\n\n\n
That\u2019s a sharp turnaround after the gauge logged 12 straight monthly gains through February, the longest streak on record.<\/p>\n\n\n\n
The precious metals and mining sector, which accounts for a quarter of the index\u2019s weighting, has tumbled 27% since the start of the Middle East conflict, wiping out this year\u2019s gains as gold and platinum prices slumped. <\/p>\n\n\n\n
That came amid a broad selloff of emerging-market stocks as investors fret that the spike in oil prices will fuel inflation, forcing central banks to raise interest rates.\u00a0<\/p>\n\n\n\n
\u201cProfit-taking in precious metals counters on de-risking has amplified the hit on South African equities,\u201d SBG Securities analysts Deanne Gordon and Adele Fermoyle wrote in a note. <\/p>\n\n\n\n
South African stocks had been one of the big winners of the past year, jumping 43% in the 12 months through February in a rally helped by a meteoric surge in gold prices and signs of cooler inflation.<\/p>\n\n\n\n
But with oil prices topping $100 a barrel and the war in the Middle East putting a chill on investor sentiment, investors have quickly unwound those bullish bets. <\/p>\n\n\n\n
The losses now mean South African stocks rank among the worst in the world, with only Dubai, Indonesia and Korea falling more since the start of the war.<\/p>\n\n\n\n
It\u2019s not only miners that have plunged. Construction and materials, retailers and banks are among the sectors that have fallen more than 10% this month.<\/p>\n\n\n\n
\u201cThe energy shock has added a new dynamic to South African equities,\u201d said Lester Davids, an analyst at Unum Capital Ltd. <\/p>\n\n\n\n
\u201cHigher energy prices and the possibility of no further interest rate cuts are starting to dim the outlook on selected domestic-facing shares.\u201d<\/p>\n\n\n\n
Some investors remain positive on South African stocks, seeing this month\u2019s decline as an opportunity to add exposure. <\/p>\n\n\n\n
SBG Securities in March reiterated its overweight view on South African stocks, with analysts pointing out that foreign investors were still net buyers of South African stocks year-to-date.<\/p>\n\n\n\n
\u201cWithin Africa, the JSE usually reacts negatively in the first phase of a conflict like any risk market,” said Cedric Beguier, the head of investment strategy at Mauritius-based AXYS Group.<\/p>\n\n\n\n
“But over time, it often holds up better than many other African exchanges thanks to its depth, its liquidity, and its large resource exporters.\u201d<\/p>\n\n\n\n
But an extended conflict in Iran would stymie any potential recovery as sustained high energy prices fuel inflation. <\/p>\n\n\n\n
The South African Reserve Bank last week lifted its inflation forecasts and warned that a prolonged war would lead to higher interest rates, which would weigh on economic growth. <\/p>\n\n\n\n
That would likely deepen the selloff to sectors other than mining, according to Avior Capital Markets.<\/p>\n\n\n\n
\u201cIn a risk-off environment, emerging markets and South Africa fall out of favour,\u201d said Adrienne Damant, an analyst at Avior. <\/p>\n\n\n\n
\u201cRetailers, banks, property and insurers will be negatively impacted by higher interest rates and low growth.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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