Johannesburg - The South African stock market is set to rise by a modest 5 percent this year but will be held back in the first half by slowing Chinese demand for resources and as a rebound in the rand curbs overseas earnings, a Reuters poll forecasts.
Johannesburg's Top-40 index gained nearly 20 percent last year and has touched new record highs this year, supported by accelerating corporate earnings.
A poll of 10 analysts taken over the past week sees the index ending the year at 44,000 points, according to their median forecast, up 5 percent from the end of 2013 and underpinned by rising earnings and modest economic growth.
That is less bullish, however than a poll taken three months ago which saw the index ending this year at 46,500 points.
PULLBACK ON THE CARDS
Analysts said the stock market was ripe for a pullback in the near term given a slowdown in China's economy, a major source of demand for South Africa's resources, and signs that the rand is starting to recover after being caught up in a sell-off of emerging market assets earlier this year.
The poll forecast that the share index, which was trading at around 42,007 on Thursday, would dip to 41,750 by the middle of this year.
“The constraints are the rand, which is unlikely to weaken dramatically from here, and the deteriorating Chinese growth picture which is undermining our resource share valuations,” Mike Haworth of Applied Capital Insights said.
The blue-chip index comprises big resources companies like the world's top platinum producer, Anglo American Platinum , Africa's top bullion producer AngloGold Ashanti and global mining company BHP Billiton. They export massively to China where economic growth is set to slow gradually over the next two years as the government forges ahead with structural reforms.
Similarly, South Africa's economy will not expand this year at the same healthy rates of the past as rising interest rates crimp growth and its main trading partners struggle.
SA’s economy will grow by just 2.5 percent this year, the survey predicted, half the pace seen in boom years between 2005-07.