South African stocks soar

Johannesburg, home of South Africa's main stock exchange

The South African stock market has bucked gloomy global trends, soaring to a fresh high due to the rand's persistent weakness against the dollar.

The country's main stock index closed 4.7% higher at a record 10,406.3 on Friday, as investors rushed to buy shares in South African companies which hold most of their assets in dollars.

South Africa's all-share index has now risen by more than 40% since 21 September, defying warnings of global recession in the wake of the 11 September attacks.

This far outstrips the performance of US and European shares, which have so far failed to rise above the level they were at before 11 September.

Fresh highs forecast

With the rand still weakening against the dollar, many analysts predict that South African shares will soar to even greater heights next week.

The rand has lost 38% of its value against the dollar this year, pressured by political instability in neighbouring Zimbabwe and the slow pace of economic reform in South Africa itself.

An attempt by the government to shore up the ailing currency by tightening controls on speculative trading has reduced the volume of cash changing hands on South African's foreign exchange markets.

This has paradoxically made the rand even more sensitive to sudden cash outflows.

Currency slide

Friday's stock market rally was triggered in part by a further steep drop in the value of the South African currency.

One dollar was worth 12.48 rands late on Friday, up from 11.57 on Thursday.

The decline was attributed to news of the arrest of Zimbabwe's opposition leader Morgan Tsvangirai.

Multinational mining companies such as Gold Fields and Anglo American Platinum were among the biggest gainers, while oil companies also rose strongly in line with rising oil prices.