South Africa stocks, currency surge to historic highs on rate cut bets
TLDR
- South Africa's stock market hits record high fueled by anticipation of interest-rate cuts and global rally in risk assets
- FTSE/JSE Africa All Share Index up by 1.1%, reaching highest level since July 1995, led by banking stocks such as Standard Bank and FirstRand Ltd.
- South Africa's rand on a winning streak, experiencing its longest rally in 13 years, positioning it as the best-performing currency against the dollar globally
South Africa’s stock market has surged to a record high, driven by the anticipation of interest-rate cuts and a global rally in risk assets. The FTSE/JSE Africa All Share Index rose by as much as 1.1% by mid-morning in Johannesburg on Friday, reaching its highest level since records began in July 1995.
This marks the index's fourth consecutive day of gains, the longest upward streak in about three months. Banking stocks led the charge, with Standard Bank and FirstRand hitting all-time highs.
Simultaneously, South Africa’s rand experienced its longest winning streak in 13 years, with nine consecutive days of gains. This impressive run, marking the rand's highest five-week close, positioned it as the best-performing currency against the dollar among more than 150 tracked globally by Bloomberg.
Key Takeaways
South African assets have gained significant favor among investors following the formation of a business-friendly coalition government two months ago and subsequent improvements in economic data. The country's inflation has been declining since February, reducing the need for the central bank to maintain high interest rates. With the Federal Reserve expected to begin cutting rates next month, South African policymakers might have the opportunity to follow suit. Historically, South African shares have performed well following elections, and this year’s election outcome provided an additional boost. The ruling African National Congress formed a coalition with the Democratic Alliance, which is viewed as business-friendly by investors. Since the May 29 vote, the stock market has delivered a 7.8% return in dollar terms, ranking it among the top 10 primary equity indices globally during this period, according to data compiled by Bloomberg.
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