Bloomberg

FOREIGNERS invested a record amount in South African stocks for a second year in a row in 2006 as they sought to profit from the country’s longest period of economic growth since the Second World War.

Overseas investment in shares rose 47% to a net R73,7bn last year, according to figures provided by the JSE, Africa’s biggest stock exchange. The country’s benchmark all share index climbed to an all-time high during the year.

Africa’s biggest economy grew at an annual rate of 4,7% in the third quarter and has expanded every quarter since September 1999. An expanding black middle class, increased government spending and surging prices of gold and platinum, its biggest exports, are boosting growth.

“Foreigners are increasingly looking at emerging markets for growth opportunities on the back of the commodities boom,” said Warren Goldblum, who manages the equivalent of $132m at Centaur Asset Management. “In SA, greater construction spending and a rising middle class has also helped boost growth.”

Emerging market stock funds received a record $22,4bn on a net basis last year, eclipsing the high of $20,3bn in 2005, according to Emerging Portfolio Fund Research, based in Cambridge, Massachusetts.

During the year, foreigners bought R480,8bn of South African shares and sold R407,1bn. Government plans to spend R370bn on infrastructure ahead of the 2010 Soccer World Cup.

At the same time, government pressure on companies to boost black participation is boosting the wealth of blacks, so pushing up sales of everything from cars to clothes and boosting corporate profits.

Retailers sold 15,2% more goods in November than a year earlier, says the Retailers’ Liaison Committee representing companies such as Edcon, SA’s biggest retailer by market value. As the world’s largest precious metals producer, SA has also benefited from rising metals prices. The price of gold rose 23,2% last year, reaching its highest level in 26 years in May. Platinum rose to a record during the year and posted an 18% gain in the 12 months.

On precious metals, the world’s three biggest platinum producers — Anglo Platinum, Impala Platinum Holdings and Lonmin — trade on the South African exchange as do AngloGold Ashanti and Gold Fields, the second- and fourth-biggest gold producers. “The increase in interest from non-South Africans in the local market is a vote of confidence,” said Graeme Korner, a fund manager at Standard Bank’s private-banking unit.

The All Share Index gained 38% last year, its fourth consecutive annual advance. That topped the 29% gain in the Morgan Stanley Capital International Emerging Markets index, which tracks stocks in 25 developing countries. SA’s benchmark index jumped 43% in 2005. “Investors are still buying into emerging market growth,” said Centaur Asset’s Goldblum, adding that SA’s spending on infrastructure from ports to soccer stadiums is attracting interest.