JSE pain hits Gold Fields, AngloGold, Sibanye, and Naspers

The precious-metals miners that propelled South African stocks to a record have become a millstone, dragging the benchmark index toward its worst quarterly slump in more than two years.

The FTSE/JSE All Share Index is down 3.3% since the end of March, the most since the three months through March 2024, compared with a gain of 24% for the MSCI emerging-markets equity gauge.

The metals and mining sub-index, which accounts for more than a quarter of the Johannesburg benchmark’s weighting, has plunged 24% in the period.

Precious-metal prices have tumbled from all-time highs since the start of the Iran war as a hawkish-leaning Federal Reserve boosted the dollar.

That’s weighed on South African miners after a rally that helped push the broad index up 78% in dollar terms between the start of 2024 and the end of February, outperforming both the MSCI emerging-market and developed-world stock gauges.

“Precious metals may struggle to regain momentum given a strong dollar and a still-hawkish Fed,” said Derrick Irwin, a senior portfolio manager at Allspring Global Investments.

“Capital is currently being pulled toward artificial intelligence-related opportunities in other emerging markets and the US, which has left South Africa somewhat out of favor.”

The worst laggards in terms of index points this quarter have been mining heavyweights Gold Fields, down 27%, AngloGold Ashanti (-19%) and Valterra Platinum (-20%), according to data compiled by Bloomberg.

Major declines since the start of the year have been seen in Sibanye Stillwater (-42%), The Foschini Group (-25%), and Naspers (-24%).

Mobile-phone provider MTN and lenders FirstRand and Capitec Bank were the biggest positive contributors.

South African stocks have been getting cheaper relative to their emerging-market peers for nearly two years, despite this quarter’s underperformance.

The FSE/JSE All Share Index’s valuation, based on estimated 12-month forward earnings, trades 19% below that of the MSCI Emerging Markets Index, compared with an 11% discount in September 2024.

For some investors, that’s an opportunity.

“Valuations are now attractive for long-term investors” though the near-term outlook “remains challenging,” said Allspring’s Irwin.

He has been adding to positions where he sees long-term value, such as companies that use technology to serve lower-income consumers or that are expanding successfully into other African markets.

Nine out of 10 respondents in a Bank of America Corp. survey of South African fund managers conducted earlier this month saw more buys than sells in market — the highest share since 2009.

However, just half of them are outright bullish on the broad index, far below the 88% before the outbreak of the Iran war. Not one was upbeat about the outlook for commodity stocks.

“Commodity bulls have disappeared as quickly as they came,” BofA strategist Andreas Bruckner said in a report. Almost two-thirds of respondents favored sitting tight rather than adding to current positions, he wrote.

Foreign inflows into South African stocks, meanwhile, have dried up, despite an improving fiscal and economic backdrop. South Africa’s equity market has seen outflows in three of the last four months, according to a separate BofA report, citing EPFR Global data.

“Underlying macro data in South Africa is good or even slightly better than expected,” said Marc Bindschaedler, a portfolio manager at Vontobel Asset Management in Zurich. “Nice music, but no-one listens to it anymore.”