Picture: BLOOMBERG
Picture: BLOOMBERG

Share prices of clothing retailers rose strongly on Tuesday, lifted by the stronger rand, but analysts suspect the rally may end soon.

South African bonds strengthened shortly before midday on Tuesday, while the rand was steady, as events at the ANC national elective conference continued to unfold.

On Monday, the rand rallied to a nine-month high to the dollar after Cyril Ramaphosa won the ANC party leadership vote.

A statement by ratings agency Moody’s Investors Service also supported sentiment.

It said Ramaphosa’s victory opened up the prospect of a policy shift and a rise in business confidence that could reverse the deterioration in the country’s credit fundamentals.

Mr Price rose 9.97% to R250.18, Truworths gained 9.5% to R95.76, while TFG increased by 13.92% to close at R194.

Momentum Securities equity research analyst Brian Mugabe said the surge in the share prices was driven by the stronger currency. "When the rand strengthens, so do these retail companies," he said.

Retailers in the food and beauty sectors also benefited from the boost brought on by the stronger currency.

Clicks jumped 8.52% to R191 while Massmart also climbed 8.49% for the day to close at R146.

"We believe that the recent rally may have gotten ahead of itself," said Capital Economics economist John Ashbourne.

He warned that Ramaphosa’s path to the presidency remained unclear without a clear plan of how he would tackle the country’s compounding economic challenges, while the governing party was also divided with a dark cloud of corruption allegations hanging over it.

"Yesterday’s [Monday’s] ANC vote was a positive result for SA’s economy," said Ashbourne. "However, markets seem to have gotten ahead of themselves given the difficult path that still lies ahead."

Meanwhile, Steinhoff continued on its downward trajectory.

Steinhoff International Holdings’ share price tumbled by 17.45% to R7 and Steinhoff Africa Retail dropped 11.46% to R17.

The decline followed an announcement by the retailer that lenders were starting to cut off support after news of an accounting scandal that destroyed most of its value in a matter of days and resulted in key executives leaving the firm.

The company also said it did not know when it would be able to publish audited results for 2017 and 2016, nor whether additional years would need to be restated.

gumedem@businesslive.co.za

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