South Africa’s JSE Top 40 Breaks Trendline on Fiscal Review Hopes
The South African JSE Top 40 Index (SA40) continued its upward surge this week by blasting through a trendline that had been blocking...
Quick overview
- The JSE Top 40 Index surged 0.9% to 104950, breaking through a trendline that had constrained its progress since mid-October.
- Investor confidence is returning, driven by expectations of a positive mid-year fiscal review and stable government revenue collection.
- Key factors supporting the index's strength include effective inflation management and a stable South African rand.
- Analysts suggest that further gains are possible, with the next resistance level at 105200, as long as support remains firm at 103700.
The South African JSE Top 40 Index (SA40) continued its upward surge this week by blasting through a trendline that had been blocking its progress since mid-October. The index rose 0.9% to 104950. It’s clear at last that the momentum has shifted in favour of the bulls after weeks of the index doing nothing but stuck in a tight trading range between 102500 and 104000.
This rebound signals a welcome return of confidence among investors across the board.
Analysts link the move to expectations that South Africa’s upcoming mid-year fiscal review will show stronger revenue performance than projected in May’s main budget.
A stable South African rand (ZAR) also helped steady sentiment, while traders anticipate that Finance Minister Enoch Godongwana’s fiscal update could paint a more balanced outlook despite slower economic growth.
Fiscal Review Brings Renewed Optimism
Economists are expecting the review to go out of its way to highlight that public finances are in a better state than we thought and that tax collection is running smoothly. And Razia Khan, Head of Research for Africa and the Middle East at Standard Chartered, reckons the tone will be upbeat. “To be honest, we expect the news to be good news for the state of the public finances.”
Key factors supporting the JSE’s recent strength include:
- Higher-than-expected government revenue collection
- Continued stability in inflation management
- Investor confidence in fiscal discipline
A supportive fiscal stance could attract both local and foreign inflows, helping sustain momentum in JSE-listed equities.
Inflation Target Under Spotlight
The South African Reserve Bank (SARB) has long advocated a lower, more predictable inflation target, a stance that earlier boosted both the rand and the bond market. Investors are now watching closely for any update on inflation guidance during Godongwana’s address.
Confirmation of a stable target range would likely reinforce market confidence and extend gains in the JSE Top 40. Still, analysts caution that any sharp downward revision to growth forecasts could temper the rally.
At the time of writing, the JALSH Index gained 827.71 points (0.74%) to close at 112,014.95 ZAR, supported by a steady rand and optimism about fiscal discipline.
Outlook: Path Toward 105,200 Resistance
From a technical view, the breakout above trendline resistance suggests room for further upside. The next big test for the JSE is the resistance level at 105200. As long as support stays firm at 103700, though, momentum could carry on, and a move up to 106270 is on the cards, suggesting that investors are becoming more confident in the country’s ability to get its finances in order and in the JSE’s ability to keep on trucking.
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