Retail stocks climbed to a record on speculation the central bank would reduce borrowing costs to spur an economy struggling to reignite growth.

The general retailers index climbed for a fourth day to a record high in the longest stretch of gains since the six days through November 14.

The International Monetary Fund lowered forecasts for South Africa’s expansion for 2015 yesterday to 2.1 percent from 2.3 percent as part of the steepest cut to the lender’s global growth outlook in three years.

“They’re reacting because of external factors,” Bruce Main, who helps manage the equivalent of $65 million (R753m) at Ivy Asset Management, said. A drop in oil prices and interest rate reductions in countries including India and Turkey was helping investors “to look a bit more positively on everything”, he said.

A slump of more than 50 percent in crude prices since last year’s peak in June is driving down the cost of fuel in South Africa, helping to keep inflation within the central bank’s target range at a time when the economy is expanding at the slowest pace since the 2009 recession.

MORE CHANCE OF A CUT THAN INCREASE

Forward rate agreements, used to speculate on interest rates, show investors see more chance of a cut than an increase over the next two quarters, the first dovish occurrence since May 2013.

Gains on the 10-member gauge of retailers were led by Woolworths, which jumped 1.7 percent to the highest since November. Woolworths last week said sales in the six months through December increased more than 55 percent.

Mr Price climbed 1.2 percent after saying last week that sales in the three months through December advanced 14 percent.

Massmart, which is owned by Wal-Mart Stores, said last week that sales climbed more than 10 percent for the 52 weeks through December 28. Shares added 1 percent to R165, the highest level since October 2013.

Truworths International, which sells more than 70 percent of its clothing on store-credit cards, rose 1.6 percent. The company dropped more than 6 percent in the three days through January 15 after saying sales in the six months through December 28 increased 5.2 percent.

“The credit cycle still worries me so I still prefer the cash retailers, which I don’t think are going to perform particularly well, but they’re certainly good long-term investments,” Main said, referring to companies such as Massmart and Mr Price.

Bloomberg 

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