South African Equities Supported by Reforms, Credit Upgrades, and Easing Inflation Pressures

South African equities could see a rebound with the FTSE/JSE40 Index attempting to stabilize following declines since late October.

Investor optimism is rising on the back of the coalition government’s pro-reform agenda, centring on economic growth and the prospect of lower interest rates, despite external challenges like U.S. election uncertainty.

Investor sentiment has been supported by favorable developments, such as S&P Global Ratings upgrading the country’s credit outlook and strong demand for a USD 3.5 billion Eurobond issuance. The FTSE/JSE Africa All Share Index has outperformed broader benchmarks this year, indicating the resilience of the South African market despite global pressures.

Foreign investor outflows from South African equities are showing signs of moderation, with net outflows slowing in November after a challenging year. This shift, along with steady interest rate normalization across Africa, provides a favorable macroeconomic backdrop.

The market’s focus has now turned to the forthcoming release of South Africa’s inflation data. Core inflation held steady at 4.1% year-on-year in both August and September, reflecting a notable easing in inflationary pressures since the February peak of 5%. Sustained progress in this trend could contribute to investor confidence, particularly in consumer goods and financial sectors.