SA mining stocks are set for handsome gains as China’s economic stimulus measures and recent increases in commodity prices are expected to provide a boost to the local sector.
China, a big importer of SA’s copper, gold and industrial metals, is on a mission to reach its 5% GDP growth target. The country has invested more than $42bn (R738bn) in a relending programme initiated by the People’s Bank of China (PBOC).
This programme encourages share buybacks and is set to increase ownership stakes in China’s publicly listed companies. So far, about $33bn in stock buybacks has been recorded, with companies like China’s oil enterprise Sinopec, tech conglomerate Tencent, and JD.com leading the charge.
The effect of this stimulus is set to boost global markets with SA exporters to China set to benefit.
According to the Observatory of Economic Complexity (OEC) China’s imports from SA reached $31.97bn in 2023, with copper and gold leading. Copper imports alone were valued at $971.69m, and copper ore exports increased 3.8% from July 2023 to the same month in 2024.
The OEC reports that SA’s key commodity export, gold has seen strong demand from China, which imported $8.85bn in 2023.
Gold prices continue to increase amid market uncertainty due to its status as a safe haven in troubled times. The precious metal saw record highs at the start of the week, and is currently trading at $2,730/oz, as geopolitical tension in the Middle East, the invasion of Ukraine by Russia and uncertainty surrounding the US election are at play.
Pepperstone research strategist Ahmad Assiri predicts that the price of the metal could increase further in the coming months.
“As Asian currencies remain sensitive to dollar movements, we could see increased demand for gold from these markets as investors seek value protection amidst currency fluctuations,” Assiri said.
“Gold’s strong rally could extend further toward $2,800-$2,900/oz in the coming months, especially if geopolitical risk persists or market participants anticipate slower monetary policy loosening. However, periods of consolidation might occur, especially if higher bond yields temporarily reduce gold’s allure.
“Still, buying interest seems well-established, with many investors adopting an accumulate-on-dips approach. If volatility remains elevated and fiscal policies continue expanding, gold’s role as a long-term store of value may solidify further, potentially paving the way for new highs.”
SA’s largest gold producer, Harmony Gold, is feasting off this gold rush, with its stock price rising by more than 18% in the past 30 days, while Gold Fields has added 24% and Pan African 11%.
Following a softer start on Tuesday, by evening trade the rand had firmed against hard currencies.
At 6pm it had gained 0.36% to R17.5308/$, 0.44% to R18.9435/€ and 0.52% to R22.7323/£.
It has gained more than 8% to the dollar in the past six months, with a big part of this boost coming from the results of the May 29 election and the formation soon thereafter of a government of national unity.
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