Daniel Wesonga

South African equities are positioned for further upside, building on Thursday’s gains, with the JSE FTSE Top 40 Index closing 0.30% higher at 84,225.99 points. Sector performance was mixed, with notable strength in communications (+1.64%), consumer non-durables (+1.41%), and technology services (+0.83%). However, declines in distribution services (-7.73%), utilities (-2.88%), and non-energy minerals (-1.78%) held back broader market performance.

Among key constituents, Naspers advanced 1.18%, while Firstrand and Capitec Bank Holdings fell by 0.83% and 1.21%, respectively.The recent policy reversal on the VAT increase has had a mixed impact on market sentiment.

The decision removes a potential pressure point on consumer spending. While this is a positive development for consumer-facing sectors, the withdrawal of the proposed expansion of zero-rated food items has tempered optimism in the retail sector as it could limit the intended relief for lower-income households, creating some uncertainty for consumption-driven stocks.

Internationally, the opening of Dubai International Chamber’s new office in Cape Town reflects South Africa’s intention to diversify its trade partners. This initiative is expected to facilitate economic collaboration between the two nations. The move positions South Africa as a gateway for businesses seeking to tap into global markets via Dubai, which could provide long-term support to various sectors, including manufacturing, finance, and services.

Looking ahead, PMI data could affect sentiment. Investors could monitor any developments in manufacturing activity, which has been in contraction territory for five months in a row. A surprise increase could help improve sentiment and support the stock market further.

Wesonga is Senior Sales Manager at Pepperstone