JOHANNESBURG: South Africa’s All-share index closed above 34,000 for the first time in its 17-year history on Thursday, after news the US Federal Reserve will continue to support economic growth lifted stocks and commodities around the world.
Gold miners such as Gold Fields surged as bullion touched its highest in more than 6 weeks after the Fed said it planned to keep interest rates at rock bottom for some years and hinted at further stimulus.
But despite the better outlook for the United States and therefore for South African resource companies, some local investors are concerned Johannesburg’s valuations can no longer be justified by company earnings prospects.
“It appears that the expensive stocks are getting more expensive,” said Nic Norman-Smith of Lentus Asset Management in Johannesburg. “Everyone is bullish and has forgotten all of the risks. There’s still a lot of expensive stocks out there that we’ll be avoiding.”
The All-share closed up 1.3 percent at 34,065.49, its highest finish since the index was launched in June 1995. Earlier in the session it rose to a new lifetime high of 34,079.54. The benchmark Top-40 index gained 1.5 percent to 30,508.85, its highest close since May 2008. The Top-40 is about 900 points shy of its own lifetime high, also set in May 2008.
South African stocks are now trading at a price-to-earnings ratio of more than 13, putting them roughly on par with US stocks. That also makes South Africa more expensive than emerging market rivals Brazil, Russia, India and China, according to Thomson Reuters data. Miner Gold Fields was the biggest gainer among blue chips, rising 5.1 percent to 129.86 rand.
Mobile operator Vodacom rose for a second day after being upgraded to “buy” from “neutral” by brokerage UBS, which cited the strength of the company’s recent performance.
Shares of Vodacom added 2.2 percent to 94.50 rand. Trade was relatively active, with 205 million shares changing hands, according to preliminary exchange data, compared to last year’s daily average of 256 million shares.
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