South Africa’s benchmark equities index is set to erase its 2020 drop, staging a spectacular snap-back from its March trough following a surge in shares of market heavyweight Naspers and a stellar performance by gold miners.

The FTSE/JSE Africa All Share Index gained as much as 1.7% on Tuesday and has climbed 50% from its March 19 low to be slightly higher for the year on an intraday basis. South African stocks have outpaced developing-nation peers, with the MSCI Emerging-Markets Index still down 3% for 2020, while the Stoxx Europe 600 Index has slipped 9%.

Naspers has contributed most to the rebound, with the tech investor up 44% this year as the Covid-19 lockdown increased demand for online services provided by Chinese Internet giant Tencent, in which the Cape Town-based company holds a 31% stake.

The gains in the South African benchmark have little to do with confidence in the local economy and more with a wave of stimulus from major global central banks that has spurred investor demand for riskier assets. National treasury forecasts that GDP will contract 7.2% in 2020, the most in almost nine decades, due to the coronavirus pandemic and restrictions put in place to curb its spread.

“The enormous rally has been fuelled by hopes of a vaccine, but primarily by global central banks stepping up, providing almost unbelievable stimulus packages and reassuring markets that they are here to provide liquidity,” said Henre Herselman, a derivatives trader at Anchor Private Clients.

Gold

An index of South African gold producers has more than doubled this year as bullion closes in on its all-time high set in 2011. Investors have piled into the haven asset at a time of deeply negative real interest rates and geopolitical risks.

“The recovery in the South African market has largely been driven by heavyweight industrial and resources shares,” Herselman said. “The search globally for yield, as global interest rates are at record lows has filtered into the bond market, but not the South Africa-focused shares broadly speaking.” — Reported by Adelaide Changole, (c) 2020 Bloomberg LP