Bullish trends in South Africa: All Share Index reaches record growth

Domestic financial markets continue their bullish run. The All Share index (ALSI|) on the JSE last week gained another 2 112 points, or 1.75%, after breaking through the 120 000 level the previous week. Since the beginning of the year the index has already traded higher by 4.9%. Over the last year the index is now higher by 44.7%. This reminds us of the previous massive boom in 2005 where the ALSI improved by more than 50%.

The main reason for this sharp rise remains the same as over the last six months. The geo-political factors in the US, Middle East, Europe, and the Russia Ukraine conflict, together with the negative effects of the Trump administration current economic policies on the Dollar. These factors contributed to the ongoing safe-haven investments in gold and other precious metals and emerging market, including South African capital market instruments (bonds).

The flight from development market assets to precious metals led to the gold price reaching a new record level on each day last week. On Friday gold bullion closed on $4 962. This is a weekly gain of $365 per ounce or 8.0%, bringing the month-to-day increase to 14.62%. The platinum price shot up last week at $397 per ounce to a new record level of $2730. This represents a weekly gain of 17.0% and traded on Friday 30.7% higher than the beginning of 2026. The Palladium price increased by $171 per ounce or 9.2% breaking through the $2 000 barrier and now trades 17.7% higher for the month of January 2026.

The rand 

Together with geopolitical effects on the US dollar, as well as the boost in precious metal prices and foreign buying of South African bonds the Rand exchange rate against the dollar appreciated strongly last week. The currency improved by 28 cents against the dollar,  or 1.7% to R16.11, at the close in New York on Friday. This represents an appreciation of 45 cents since the beginning of the year.

Given the increase in South Africa’s annual inflation rate in December to 3.6%, against the annual rate of change in the CPI of 3.5% in November, the Rand against the Pound remained flat at R21.90/£, however, the Rand improved by 42 cents from the beginning of the year or by 1.9%, and in line with the appreciation against the dollar. The currency also traded flat against the Euro last week on R19.08/€. From the beginning of the year the Rand, however, has appreciated by 45 cents or 1.9%.

The 56th World Economic Forum, also known as Davos 2026, in Davos, Switzerland, from 19 to 23 January 2026, contributed to further dollar weakening, due to President Trump's claim on Greenland, that lead to a uniformed Europe's resistance, possibly helped by the ensuing fall on financial markets, was seen as one reason he backed off. The dollar experienced significant volatility during the World Economic Forum. The greenback slid against the basket of major currencies on Wednesday in response to geopolitical concerns but rebounded following  Trump’s U-turn. The US President decided not to impose tariffs on European countries in the ongoing dispute over Greenland’s sovereignty. The dollar ended the week 2 cents (-2.05%) weaker against the Pound at $1.36/£ and 2 cents against the Euro at R1.18/€, the weakest level since April 2021.

Prospects for the petrol price, and the repo rate

The US military intervention in Venezuela and the air strikes on Iran, remain the main reason for modest oil price increases. Brent crude last week traded higher by $1.07 per barrel and closed Friday at R65.88 to the dollar. Given the stronger Rand/dollar since the beginning of January it is expected that the petrol price should decrease by 68 cents and 63 cents per liter for petrol and diesel at the beginning of February 2026.

The Monetary Policy Committee (MPC) of the SA Reserve Bank  (SARB) will hold its first repo rate decision meeting this coming week. Although the inflation rate increased marginally to 3.6% in December 2025, the annual average increase was 3.2%. That is close to the 3.0% “new” target set by Treasury. It is, however, expected that the MPC will keep the repo rate at 6.75%. Markets also await if SARB governor Lesetja Kganyago will make some announcement on the prime overdraft rate, set by the SARB at 3.5% above the repo rate. He wants this rate to be scrapped.

The Federal Reserve’s FOMC meeting

Apart from the MPC meeting this coming week, the US Federal Reserve’s Open Market Commission (FOMC) will hold its first meeting for 2026 on Wednesday. It is expected that the commission will keep the Fed’s bank rate at its current level of between 3.5% and 3.75%. This neutral passion of the Fed is expected due to the steady US annual inflation rate of 2.7% during December and its unemployment rate that came down to 4.4%. On the geopolitical front fears grow Trump will strike Iran as an “armada” of US military ships is sailing towards Iran. The dollar will remain under pressure, and it is expected that the gold price will break through the $5 000 per ounce level and that the Rand may test the R16.00/$ level.

Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.

** The views expressed here do not necessarily represent those of Independent Media or IOL.

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