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South Africa: JSE Rally – It’s Prudent to Factor in What Could Spoil the Party

The JSE continues to outpace its developed market peers in a rally that has – including a few pullbacks – added 77% to the value of the exchange since last March’s market meltdown. However, with most of the good news driving the recovery emanating from beyond South Africa’s shores, can it continue?

Optimism over strong recoveries in developed market economies, including the US and most of Europe, as vaccine programmes are rolled out, has helped fuel strong equity market performances this year. So, too, has the massive stimulus pumped into economies by central banks, including the Federal Reserve.

While the JSE’s gains seem to belie local economic prospects and the slow pace of vaccinations, it is benefiting, to the full, from the global factors.

The exchange’s broad-market All Share Index rallied more than 3% on Friday, and continued rising on Sunday, taking its year-to-date gain to over 13%. The blue-chip Top 40 Index, which includes the exchange’s most valuable shares, shows a similar gain.

As has been the case for most of the year, resource stocks have led the charge, with the JSE’s Resources 10 Index soaring 5%.

Chantal Marx, head of investment research at FNB Wealth and Investments, said…