South Africa's stock market has risen for 12 consecutive months, reaching a historic high. Bank of America says it is supported by gold prices and exchange rates and still has room to rise.

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South Africa’s stock market has set the longest consecutive upward record since 1995, according to Bank of America, as surging commodity prices and a strengthening rand create a rare resonance, and the market still has further room to rise.

South Africa's benchmark stock index hit a historic high on Monday, boosted by rising gold and silver prices following U.S. and Israeli strikes on Iran. Although the index later retreated, its performance that day still outpaced the broader emerging market indexes. John Morris, South Africa strategist at Bank of America, said, “The South African market is benefiting from a rare resonance of global and domestic favorable factors, especially the high prices of metals and market expectations for a weaker dollar.”

"We are in a sweet spot," John Morris said in an interview, "Such combinations are rare, and we still have room to move up." He believes the commodity cycle will continue to support the market for the next 12 to 15 months, and the rand may further strengthen, thereby lowering bond yields and providing support for banks and other domestic industries.

The escalation of tensions in the Middle East has not changed his positive view of the South African market. He pointed out that precious metals prices remained strong on Monday, and this factor is more crucial for the positive impact on South Africa’s market.

12 consecutive months of gains, longest streak since 1995

The FTSE/JSE All Share Index has jumped 44% over the past year, with metals and mining stocks seeing the most significant gains. The index has recorded positive returns for 12 consecutive months, the longest streak tracked by Bloomberg since 1995. In February alone, the index rose 7%, marking the biggest monthly gain in more than two years and the best February performance for South Africa’s stock market since the global financial crisis.

John Morris said the rare synchrony of global and domestic favorable factors has jointly supported this historic rally.

The strong performance of commodities is the core driving force of this rally. Over the past year, gold prices have surged by 86%, with platinum soaring even higher at 146%, both providing solid support for South Africa’s stock market.

"This is the decade of resources, with U.S. inflation still high," John Morris said. "It feels like it's back to the 1970s." He believes the current commodity cycle has the basis to extend for another 12 to 15 months, enough to continue supporting related sectors in South Africa.

Growth remains moderate, excess returns hard to repeat

Besides commodities, the rand’s performance is also an important support for the South African market. Over the past year, the rand has appreciated about 15% against the U.S. dollar. John Morris believes the rand is still undervalued and expects it to further strengthen, which will drive down bond yields and benefit domestic industries such as banking.

He said rising commodity prices will drive the rand higher, thereby boosting the profits of South African local companies. Financial and industrial stocks are expected to achieve considerable returns as they catch up with mining stocks. He also believes that South Africa’s latest budget “further supports the logic of investing in local assets.”

John Morris also emphasized that this bull market is not without limitations. Although falling inflation may give the South African Reserve Bank room to cut interest rates and help strengthen cyclical recovery, current economic growth remains moderate and reforms are progressing gradually.

"You won’t get the kind of excess returns seen last year," he said, "But the direction of the market is still upward, with volatility along the way." In his view, the structural support for South Africa's stock market remains, and investors need to grasp the overall trend while keeping appropriate expectations for short-term pullbacks.

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