South Africa stocks at record high, but valuations a concern

An electronic board displaying movements in major indices is seen at Johannesburg stock exchange in Sandton September 23, 2008. REUTERS/Siphiwe Sibeko

JOHANNESBURG (Reuters) - South African stocks hit record highs on Wednesday, with index heavyweights such as FirstRand gaining after investor confidence was bolstered by expectations the United States will continue with its massive stimulus programme.

But the advances were limited by concerns equities are overpriced after a series of record finishes this year. Investors were also looking ahead to South Africa's central bank policy decision on Thursday.

U.S. Federal Reserve Chair Janet Yellen on Tuesday signalled the Fed will keep monetary policy loose until hiring and wage data improve.

"There's no indication that the U.S. is going to stop earlier with (stimulus) than what the market had been expecting," said Abri du Plessis, chief investment officer of Gryphon Asset Management. He however added that potential interest rate hikes in South Africa were a worry.

"I'm a bit concerned about valuations. I think they are stretched and if we're going to see more interest rate hikes, we're going to smash growth."

South Africa's central bank will decide on interest rates on Thursday, with a Reuters poll showing most of the 31 economists surveyed expect it to hold rates at 5.5 percent, although some do see a hike of 25 basis points.

The All-Share index, the broadest measure of South African stock performance, rose 0.66 percent to 52,076, its highest finish on record, after earlier hitting an intraday high.

The benchmark Top-40 index finished up 0.68 percent at 46,946, close to a record set earlier this month.

FirstRand, South Africa's second-largest bank, rose 2.8 percent to 42.68 rand. Fellow index heavyweight Anglo American Platinum rose 2.1 percent to 469.46 rand.

Among decliners, construction firm Aveng tumbled 6.1 percent to 22 rand after it said it would issue 1.5 billion rand ($141 million) worth of convertible bonds, sparking dilution fears.

A total of 176 million shares changed hands, in line with last year's daily average. A total of 195 shares advanced, while 125 declined and 49 were unchanged. ($1 = 10.6653 South African Rand)