South African stocks, once world-beaters, have become laggards, with the mining sector largely to blame. The FTSE/JSE All Share Index is on track for its worst month since September 2008, largely due to the Iran war dampening demand for emerging-market assets and plummeting precious metal prices weighing heavily on the country's miners. This marks a sharp reversal from 12 consecutive months of gains through February, which had been the longest streak on record.
Specifically, the precious metals and mining sector, which constitutes approximately a quarter of the index, has seen a significant slump of 27% since the Middle East conflict began. This downturn has erased earlier gains for the year as both gold and platinum prices have fallen. Major mining companies such as Valterra Platinum Ltd., Northam Platinum Holdings Ltd., and Anglogold Ashanti Plc experienced declines of over 12% each.
The overall FTSE/JSE All Share Index fell 14% in March, and by March 27, it had dropped 13%. This indicates a broad-based decline, with other sectors like construction, materials, retail, and banking also experiencing drops of more than 10% this month. The South African Reserve Bank has also raised inflation forecasts, signaling potentially higher interest rates ahead, which could further pressure growth across various sectors beyond mining.
This current downturn follows a period where South African stocks were among the world’s top performers, with the FTSE/JSE All Share Index climbing 44% and achieving its longest streak of monthly gains since 1995. This rally was fueled by soaring gold and other metal prices, a stronger rand, and signs of easing inflation. February alone saw a 7% gain, led by metals and mining stocks. However, with oil prices exceeding $100 a barrel and investor sentiment shaken by the Middle East conflict, much of that optimism has dissipated. While some investors view this as a buying opportunity, analysts caution that a prolonged conflict could deepen the selloff.
