Better news from China on Tuesday gave South African stocks the boost they needed to erase their losses for 2022.

The main index climbed as much as 1.1% as Chinese markets rebounded, briefly wiping out this year’s declines, with sentiment soothed by an easing in the protests over Covid restrictions that had unnerved global investors. The gains are a reminder of how South African equities stand to benefit from China reopening its economy, given the influence of commodities, technology and even luxury retail on the Johannesburg bourse.

South African stocks have rallied 16% since hitting their low for the year in late September. They’ve surged 10% since the start of November, on course for their strongest month in two years.

Luxury retailer Richemont, tech investor Naspers — owner of a chunk of Chinese online behemoth Tencent — and mining giant Anglo American are the biggest drivers of the surge since late September, based on index points. Prospects for commodities look positive as China gradually emerges from the grip of Covid curbs, said Hannes van den Berg, co-head of South African equity multi-asset investments at Ninety One Plc, which oversees about £132 billion ($160 billion) in assets.

“If China starts to consolidate and potentially show some positive signs of growth, that is great for our South African resources — that basically provides a tailwind to our index,” Cape Town-based Van den Berg said. Among miners, he favors South32, Glencore and BHP for their China exposure. Ninety One is also overweight Richemont, as the luxury retailer is poised to benefit from pent-up demand among Chinese consumers.

Helped by rising interest rates, banking stocks have jumped almost 20% from the September low, with an index of lenders now headed for the best year on record. The local central bank last week delivered another jumbo hike, prolonging its most aggressive monetary policy tightening cycle in at least two decades in an attempt to tame inflation.

While South Africa’s benchmark equity index has steadied for the year, MSCI’s index of emerging-market stocks is down 23%, an outperformance that Jason Swartz, a portfolio manager at Old Mutual Investment Group sees continuing next year.

“Given our valuations were more attractive than emerging markets, that should be a support for us to continue to outperform them,” Swartz said. Members of the FTSE/JSE Africa All Share Index trade at an average of 9.8 times their estimated 2023 earnings, compared with 11.4 times for the developing-nation gauge.

Here are some of the other key performances in South African equities this year:

Biggest gainer: Thungela Resources has soared 260% thanks to demand for its coal as European countries scramble for energy supplies in the wake of Russia’s invasion of Ukraine and measures adopted against Moscow.
Worst laggards: Murray & Roberts Holdings, down 68%; Steinhoff International NV, down 67%.