Johannesburg stocks set for biggest monthly gain in two years

Johannesburg stocks rose for a sixth day, the longest stretch of advances since May 2014, as shares in companies that benefit from rand weakness drove the South African benchmark index higher.

The FTSE/JSE Africa All Share Index climbed 0.1% to 54,514.58 as of 10:05 a.m., extending the gain for May to 2.9 percent. The index is poised to advance for a fourth month, the longest such sequence since July 2014. Tuesday’s gains were led by Naspers Ltd., the continent’s biggest company by market value, which rose to a record. British American Tobacco Plc and Standard Bank Group Ltd. were among other stocks contributing most to the increase in the benchmark.

Naspers, SABMiller Plc, and Cie Financiere Richemont SA, all so-called rand-hedge stocks, collectively make up 32 percent of Johannesburg’s benchmark index, according to data compiled by Bloomberg. The rand has weakened 26 percent against the dollar since the start of last year, more than any emerging-market currency, aside from the Argentine peso.

“It’s a bit of a false rally in that our overall market still isn’t really performing,” said Vunani Private Clients money manager Michele Santangelo. “Some of the really heavyweight dual-listed stocks, which are pure rand hedges, are rallying off the back of a weak rand in May.”

The All Share Index’s 14-day relative strength index climbed to 69.5, near the 70 level that indicates to some technical traders that a security is overbought and is poised to fall. The rand declined 0.3 percent to 15.8547 per dollar, extending its drop this month to 10 percent, the biggest slump since May 2013.

The rally in Johannesburg stocks will be sustained if the rand weakness continues, according to Vunani’s Santangelo. The near-term outlook for the currency may hinge on the outcome of S&P Global Ratings’ review of South Africa, expected on June 3, he said.

“Perhaps on Friday we’ll see what Standard & Poor’s has to say — if they push us out and they don’t downgrade us and they give us a little bit more time, then you’ll be able to see the rand come back a bit,” Santangelo said.