South African markets edge higher before key speech and data

South African share prices rose on Thursday as investors balanced optimism over global market trends with caution ahead of President Cyril Ramaphosa’s keynote address to Parliament and the release of critical domestic economic information. The benchmark Johannesburg Stock Exchange Top-40 index climbed around 0.5 per cent during early trade, buoyed by gains in resource and financial stocks, while the rand strengthened modestly against the US dollar, reflecting broader positive sentiment across emerging markets. Market participants said the interplay between expected policy direction and forthcoming macroeconomic indicators was shaping investment decisions across equities, bonds and foreign exchange markets.

Trading activity was underpinned by renewed confidence in sectors sensitive to global demand, particularly mining and materials, as international commodity prices held up after recent volatility. Analysts noted that precious metals, a key export component, continued to attract foreign capital amid expectations that geopolitical uncertainties could sustain demand for safe-haven assets and currency flows into emerging economies. Local financials also contributed to the uptick as banks and insurers responded to expectations of stabilising credit conditions and the potential for softer inflationary pressures to support lending activity.

Attention across global markets has been concentrated on how the US Federal Reserve will calibrate interest-rate policy in the coming months, especially as labour and inflation data from the world’s largest economy will influence risk appetite. A flat US dollar against a basket of major currencies helped emerging currencies, including the rand, find favour among investors managing cross-border portfolios. This dynamic has supported capital flows into equities and bonds in frontier markets such as South Africa, where attractive yields and valuation metrics appeal to yield-seeking funds.

Within South Africa’s fixed-income space, yields on longer-dated government securities showed mixed signals. While demand for debt instruments remained reasonably strong, indicating confidence among institutional investors, slight upticks in some yields suggested that market participants were hedging against potential shifts in monetary policy contingent on upcoming inflation figures. These developments were interpreted as a cautious endorsement of the nation’s macroeconomic framework, even as structural challenges persist in translating favourable data into sustained growth.

Economists and strategists pointed to the significance of the State of the Nation Address as a pivotal event for clarifying policy priorities that could influence investor sentiment. Ramaphosa is expected to outline economic reform initiatives aimed at lifting growth, tackling unemployment and enhancing energy reliability — key factors for business confidence and market performance. Non-government voices have underscored the need for measurable commitments on job creation and service delivery to reinforce credibility among both domestic and foreign investors.

Simphiwe Letlojane, Head of Investment Strategy at Absa Investments, highlighted on market panels that the convergence of global and local factors was shaping sector rotation strategies. She noted that investor focus had shifted towards financials and defensive sectors in response to easing inflation expectations and evolving macroeconomic indicators, while resource stocks remained attractive given their exposure to commodity cycles. This strategic shift reflects a broader recalibration of asset allocations amid uncertainties around monetary policy and geopolitical factors.

Market sentiment through the week has also been influenced by external developments. Global equities have shown resilience as major indices in developed markets absorbed data on corporate earnings and consumer demand. This broader positive trend has lent support to risk assets in South Africa, even as investors manage idiosyncratic risks associated with local infrastructure constraints and high unemployment.

Domestic economic indicators released on the same day illustrated a mixed picture of activity. Mining output rose by 2.5 per cent year-on-year in December, reversing a prior contraction and suggesting resilience in the resources sector. However, manufacturing output continued to decline, underscoring persistent headwinds in industrial production and the challenges of reinvigorating local value chains. Economists said these bifurcated trends reinforced the need for comprehensive policy support to sustain diversified growth.

Several pension funds and asset managers reported increased positioning for exposure to South African equities, citing attractive dividend yields and valuations relative to other emerging markets. Institutional interest has been particularly notable in sectors linked to infrastructure, utilities and technology, where long-term growth prospects are deemed robust despite short-term volatility. This pattern illustrates how domestic and international capital is navigating a landscape shaped by policy anticipation and shifting global risk parameters.