Investors are set to take profits on South Africa's record-breaking stocks this week as chances of an interest rate cut dim, but banks, led by Absa, and retail shares are expected to remain attractive. A slump in rand-sensitive resource companies this week was well-countered by strong demand for bank, industrial and retail shares which have buoyed Johannesburg's all-share index to historic highs. But profit-taking kicked-in on Friday.
Hovering near six-year peaks at the 5.7075/dlr level, the rand could also put a further dampener on the equities party.
The index is dominated by some of the world's leading mining and resource companies such as Anglo American and BHP Billiton, whose export revenues from their dollar-denominated products shrivel when the rand strengthens, hurting their shares.
South Africa's Top 40 index of blue chip stocks has gained more than 20 percent so far this year, making it one of the world's fastest-growing stock markets.
On interest rates, a majority of 19 economists polled by Reuters this week forecast that the Reserve Bank would keep its repo rate unchanged at 7.50 percent this week.
Equity dealers were also not betting on a rate cut, which could have cheered companies, and possibly kept stocks on the upward trot.
"I expect the rand to keep mining stocks held back; the market has been strong but will see some consolidation on profit-taking," Ferdi Heyneke at Afrifocus Securities said.
"I don't see a rate cut this week, spending figures suggest rates may not drop as this could spark a spending spree."
Another trader who held similar views on rates, said the market would move more sideways, rather than sharply down.
The corporate scene has a scanty offering - mid-cap Metro Cash & Carry, which owns 61 percent of Australia-listed Metcash Trading posts its interim earnings on Tuesday.
But the showdown vote also on Tuesday by shareholders of Gold Fields on the agreed merger with Canada's Iamgold could rivet the market's attention.
Hostile suitor Harmony Gold has vowed to block the Iamgold deal as part of its wider plan to buy Gold Fields in an all-share offer worth around $6.6 billion. It has said it will drop the hostile bid if it fails to cancel the Iamgold deal.