Johannesburg - South Africa's blue-chip stock index will
climb just another 2% by the end of the year, performing worse than other major
emerging economies because of the country’s reliance for much of its trade on
Europe, where growth is grinding to halt.
Africa's biggest economy is struggling to gain traction
after a 2009 recession, but room for stimulus at home is limited by concerns
about inflation, especially as the rand currency weakened.
This leaves the country reliant on a recovery of demand from
abroad, something very much still in doubt as European policymakers have yet to
convince markets that they have got the continent's debt crisis, raging for
nearly three years, firmly under control.
The Johannesburg Top 40 - (Tradeable) [JSE:J200] index has
already rallied close to 6% from the start of the year and will rise a bit more
to 30,750 by year-end according to the survey of 10 analysts. It was trading at
around 30,214 on Friday.
But, as with the most recent outlook for many other stock
markets around the globe, these end-year forecasts were lower than a similar
poll in March, which predicted the index would close 2012 at 33,000.
It was also significantly behind other major developing
economies like Brazil and India, whose stock markets are expected to rally 24%
and 10% respectively by the end of the year.
Analysts say much will depend on major trading partner
Europe, where about a quarter of South Africa’s exports go.
“Hopefully Europe will by the end of the year sort out their
financial and political issues and thus hopefully we not going to have further
downward revision in economic growth,” said Wilmar Buys, a trader at FFO
European leaders at a summit last week made available rescue
funds that could be used to lower government borrowing costs for Spain and
That gave some hope that Europe may manage to steady itself,
although the latest purchasing managers’ indexes suggested the biggest
economies are in recession or heading there.
An expected firming in the South African rand toward the end
of the year may also make stocks more attractive to investors looking for
In the Reuters Econometer for South Africa published on
Thursday, for the first time since January economists nudged down their gross
domestic product growth forecast for 2012, to 2.7% from 2.8%.
The central bank has kept interest rates steady for the past
18 months at three decade lows. However it has pledged that its primary focus
is to maintain price stability and the latest forecast is that rates will stay
flat to year-end, even with the prospect of slowing growth.
This is a frequent source of contention with unions who have
called for nationalisation of the bank and the change of its mandate from
inflation targeting to job creation.
That leaves South Africa looking abroad for growth
On Thursday, the European Central Bank cut its refinancing
rate by 25 basis points and its deposit rate to zero.
The Bank of England said it would print another £50bn of
money to inject into the economy and China’s central bank unexpectedly slashed
rates for the second month in a row.
But none of these central bank moves did much to push stock
markets higher as the focus has shifted to a dimming global economic outlook.
Reuters polled Africa’s big banks, independent analysts as
well as international participants. Several Africa-based equity analysts and strategists
in major global banks who participated in the wider poll declined to give
forecasts for the Top 40.