Navigating the JSE All Share Index: opportunities and challenges ahead

The JSE All Share Index (ALSI) has surged past 110 000 points to record highs. This, coupled with the country’s recent exit from the FATF grey list, a seemingly well-received Medium-Term Budget Policy Statement (MTBPS) in November –including the newly announced 3% per annum inflation target – and a strengthening rand (now 10% stronger versus the dollar in 2025) all paint a picture of a resurgent local market and prompt renewed questions about whether it’s time to “bring money home”. However, a closer look beneath the surface reveals a more nuanced reality: a tale of two distinct markets moving at very different speeds.

Investors should be cautious about interpreting the top-line index performance as a broad-based endorsement of the local economy. “If you look under the hood of the recent rally, it’s not necessarily driven by SA Inc. It’s been driven by a specific defensive, risk-off sentiment globally. This isn’t a vote of confidence in South Africa just yet; rather, we are a major beneficiary of external factors, particularly the strong performance of gold and platinum group metals (PGMs).”

The anatomy of a record-breaking rally

The data supports this view. The ALSI’s stellar performance has been heavily concentrated in a few key sectors. Year to date, gold and platinum prices are trading significantly higher at 62% and 84% respectively, which has benefitted the underlying shares, with some gold and PGM counters delivering triple-digit returns. Together with select rand-hedged stocks, these sectors have accounted for most of the index’s gains in 2025.

In stark contrast, discretionary retailers have plunged in 2025, with some of the large domestic retailers like Truworths, Mr Price, and The Foschini Group down 48%, 29%, and 46% respectively. Additionally, banks and insurers have posted only modest gains, hampered by weak consumer demand, high borrowing costs, and sluggish growth.

This has been more of a defensive trade. We’re seeing central banks accumulating gold as a mechanism against dollar weakness. This has created a powerful theme that has lifted our resource counters. However, many domestic SA Inc companies, the retailers, the banks, the industrial firms, are still trading at levels that present significant value, as they haven’t participated in this narrow rally.

The foundation for a sustainable recovery

While the current rally may be narrow, Mothae is optimistic about the structural and policy shifts that are laying the groundwork for a more sustainable, long-term recovery. Several critical building blocks are falling into place, improving the underlying investment case for the country.

• Exit from the grey list: South Africa’s removal from the FATF grey list on 24 October 2025 was a monumental achievement. Doing business under grey listing adds a huge compliance risk and can take you out of the game. The removal of this barrier is a massive positive tick, improving sentiment and reducing friction for cross-border investment.
• Energy and logistics stability: The end of persistent, high-stage load shedding has been a significant boost for economic productivity. We’ve almost forgotten what it was like tracking the load-shedding schedule eight months ago, but the positive impact on productivity and business capex is enormous. Similar improvements, though slower, are being seen in logistics at Transnet.
• Improved credit outlook: Major ratings agencies like S&P Global have adopted a positive outlook on South Africa’s sovereign credit rating. While an upgrade to investment grade is still some way off, the trajectory looks positive.

The missing catalyst: unlocking economic growth

Despite these positive developments, the ultimate trigger for a broad-based re-rating of SA Inc stocks remains elusive: economic growth. Mothae says with GDP growth still hovering below 1%, much of the potential investment capital, both local and foreign, remains on the sidelines.

Growth is the biggest thing that will ensure the positive sentiment trade comes through sustainably. That’s the catalyst that will filter into company earnings, consumer spending, and broad investor confidence. When we see a clear path to higher growth, the capital waiting on the sidelines will be deployed, and that’s when SA Inc will truly begin to re-rate.

An investor’s takeaway

Many managers are starting to see that SA Inc is priced attractively. The current market looks good on the surface, but the real, fundamental opportunity is building in the sectors that have been left behind. For investors with a long-term horizon, this is where the compelling story for South Africa lies.

* Mothae is the head of local manager research at Sanlam Investments Multi-Manager.

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