(Bloomberg) — South African stocks have just closed out their strongest first half in 14 years, and JPMorgan Chase & Co. is among those forecasting further gains for 2021.

The benchmark FTSE/JSE Africa All Share Index climbed 12% in the first six months of the year, the best performance since 2007. That outpaced developing country peers, with MSCI Inc.’s gauge of emerging markets up less than 7%. Johannesburg stocks continue to trade at a discount to the MSCI gauge.

JPMorgan is overweight South African domestic stocks, including banks and general industrial companies, which stand to benefit in a recovery from the pandemic, adding to the tailwinds provided by rallying commodities prices that have boosted stock prices and the local currency.

“The outperformance for South African relative to emerging-market focused stocks is not over yet,” John Storey, the U.S. bank’s head of South African equity research, said in an emailed response to questions. “The investment sentiment and mood in South Africa is improving, underpinned by a stronger rand, committed foreign direct investment, strategic inbound M&A and an overall improvement in consumer and business confidence.”

Domestic South African stocks have been boosted by a rebound in economic activity as well as the quickening pace of reforms in the country, said Peter Brooke, a portfolio manager at Old Mutual Investment Group, which oversees more than $45 billion.

“A lot of this recovery has been driven by earnings, so the market has not been getting much more expensive and generally the companies have delivered what we see as good results,” Brooke said. “There has been quite good cost control and good cash control, and now you have companies that are exiting in good financial shape and actually, we don’t think they have gotten expensive yet.”

The optimism is felt more widely: Bank of America Corp.’s June survey of South African fund managers showed they see returns rising by 17% over the next 12 months.

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JPMorgan lists five South African companies among its top 10 picks within the Central and Eastern Europe, Middle East and Africa region: Sibanye Stillwater Ltd., MTN Group Ltd., Capitec Bank Holdings Ltd., Absa Group Ltd. and Bidvest Group Ltd.

For OMIG, opportunities are rising in small and mid-cap industrial companies that are exposed to the renewable energy sector.

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