By Daniel Wesonga

South African equities continue to advance, with the JSE FTSE Top 40 index breaking above the key 81,000-point resistance level. Market sentiment has improved, with 11 out of 20 sectors closing positively on Friday. Notably, the transportation sector led gains, adding 1.17%, followed by consumer non-durables and process industries. The financial sector also saw a 0.66% gain, with major banks such as Firstrand Ltd and Standard Bank Group closing higher. This broad-based sector performance indicates a bullish short-term outlook. However, market strength will depend on global economic conditions and domestic policy developments.

The recent fuel price decreases have also supported market optimism. The Department of Mineral Resources and Energy (DMRE) reduced fuel prices, attributing these adjustments to lower oil prices and a steady rand. While fuel price reductions may not provide significant relief to consumers, they benefit businesses that depend on transport costs, particularly in the industrial and consumer sectors. This could improve profitability, particularly for firms with high logistics expenses. However, inflation and cost-of-living pressures may still limit the positive impact on consumer spending.

With only a 0.6% GDP growth rate in 2024, South Africa faces persistent challenges. High unemployment and inflation continue to strain consumers, weighing on sectors reliant on discretionary spending. The upcoming National Budget Speech will be critical in addressing these challenges, which could have an impact on the outlook for South African equities in the medium term.

Wesonga is Senior Sales Manager at Pepperstone