South African stocks rebound – but investors should tread carefully

A logo stands on the wall in the reception area of the Johannesburg Stock Exchange (JSE) in the Sandton district of Johannesburg, South Africa, on Monday, Sept. 3, 2018. The emerging-market sell-off may have already battered South Africa's rand, but it could get worse as traders fret about a push for land reform that may have far-reaching economic consequences and is catching the attention of world leaders. Photographer: Waldo Swiegers/Bloomberg

South Africa’s benchmark index has staged a spectacular snap-back from its March nadir as global signs the coronavirus pandemic may be being brought under control encourage investors to return to riskier assets.

But the gains have been accompanied by record volatility, underscoring the need for caution. A measure of the index’s 30-day volatility has set a fresh record high of 70.54, with stock prices swinging by their wildest margins ever.

Since spiralling into a bear market last month, the FTSE/JSE Africa All Share Index has surged 24% from its March 19th low, a technical sign that the benchmark has already entered a bull market.

“Many are ready to buy into the optimistic narrative and discount the fact that we still don’t have a full understanding of how much the virus has spread or how it behaves,” said Lulama Qongqo, an analyst at Mergence Investment Managers in Cape Town.

“I trust in the scientists when they say that it will take 12 to 18 months for us to have a vaccine for distribution. Until then, people, companies, and governments will likely need to tread carefully.”

Biggest gainers in the rebound include:

Mpact Ltd. (+626%);
Hospitality Property Fund Ltd. (+124%);
Curro Holdings Ltd. (+84%);
Royal Bafokeng Platinum Ltd. (+82%);
Anglo American Platinum Ltd. (+80%);
Sasol Ltd. (+75%).
The South African benchmark index was 1.3% lower as of 13h17 in Johannesburg, taking this year’s decline to 18%.

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