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1 month ago
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Local stocks fell in early trade as gold reversed its rally.
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South African stocks dropped in volatile trading Monday, at one stage falling the most since March 2020, as they tracked the turmoil in precious-metals prices.
The FTSE/JSE All Share Index fell as much as 6.1% before trimming declines to 3% by 10:22 a.m. in Johannesburg. An index of precious metals miners led the losses, sinking 11%. Sharp retreats in Gold Fields, Anglogold Ashanti and Valterra Platinum weighed heaviest on the overall market.
The country’s stocks — which just wrapped an 11-month record rally — are swept up in the stunning selloff across precious metals.
Gold plunged as much as 10% to briefly trade around $4 400 an ounce on Monday, after a rally that took it to nearly $5 600 in January. Silver plummeted as much as 16%, following a record 26% slump on Friday.
The main Johannesburg index had more than halved its losses an hour and 20 minutes into Monday’s session as dip buyers stepped in to take advantage of the initial plunge.
“The rebound following the sharp selloff is primarily a result of bargain hunters looking to capitalize and profit from the volatility,” said Lester Davids, an analyst at Unum Capital.
The commodities rally has buoyed South African stocks, driving outperformance over emerging market peers in the past year. The index is up 58% in dollar terms over the past 12 months, compared to a 38% gain for the MSCI Emerging Markets Index. Valuations have remained subdued, with Johannesburg trading at a 30% discount to its developing-market peers.
While miners had carried the bulk of the rally, investors have said they expect the gains to broaden, citing banks, retailers and industrial companies as the next beneficiaries. Still, the South African market may struggle to retain its outperformance without support from miners, which are heavily weighted in the main index.
*Update: This article was updated at 11:00 on Monday.
