Telkom SA Jumps 6% Toward ZAC 6,180 as Rand Strength Fuels Telecom Optimism
Telkom SA SOC Ltd (JSE: TKG) is on the up again - trading at around ZAC 6,180 - as improved domestic signals have really lifted the mood...
Quick overview
- Telkom SA is experiencing positive trading momentum, currently at ZAC 6,180, driven by improved domestic signals and a firmer rand.
- Investors are focusing on the stability of the macro environment and growing domestic demand, despite Telkom's operational challenges.
- Moderate inflation expectations are beneficial for Telkom, as they help preserve household purchasing power and support demand for telecom services.
- Technically, Telkom's stock is showing constructive price action, with support levels and a potential trade opportunity identified.
Telkom SA SOC Ltd (JSE: TKG) is on the up again – trading at around ZAC 6,180 – as improved domestic signals have really lifted the mood in South African equities. The rand is looking a bit firmer, and expectations of contained inflation are making local-facing companies like Telkom very attractive, particularly in defensive sectors like telecoms.
The Johannesburg Stock Exchange is holding steady, but Telkom is edging ahead of its peers for now. Investors are happy to overlook Telkom’s operational and competitive challenges and instead focus on the stability of the macro environment and the company’s ability to tap into growing domestic demand.
The Rand and Inflation – What’s Shaping Investor Mood
The rand has been modestly stronger, up to around 16.39 against the US dollar, gaining maybe 0.2% on the day. This is good news for telecom operators, as a stronger rand will make importing network equipment and other infrastructure much cheaper.
Inflation expectations are actually quite supportive rather than restrictive. Economists are predicting December headline inflation at around 3.6% – just a notch above November’s 3.5%. Here’s what you’re seeing:
- Fuel prices rose 1.4%, slowing the year-on-year decline a bit.
- Food inflation is expected to ease to 4.3% from 4.4%.
- Lower cereal prices are helping to offset higher meat prices.
For Telkom, moderate inflation is good news because it preserves household purchasing power, which supports demand for mobile and broadband services.
What’s Happening in the Retail Sector and on Bond Markets?
The South African consumer is looking a bit uncertain at the moment, but still pretty resilient. Here’s where they’re forecasting November retail sales to be:
- Nedbank is expecting growth to accelerate to 4.8% thanks to Black Friday.
- Reuters has a more cautious view – they think it will be a 2.5% reading.
Meanwhile, the bond markets are looking pretty stable – yields on South Africa’s 2035 government bonds have dipped to around 8.43%, suggesting that demand for local assets remains strong from both local and foreign investors.
The Technical Outlook – Channel Structure Holding Up Well
From a technical perspective, Telkom’s price action is looking pretty constructive. The stock is pushing up against the upper boundary of a rising channel that’s been in place since the end of November. The recent candlesticks are showing some nice firm closes and shallow pullbacks, which is good – it means that controlled buying is happening rather than momentum exhaustion.
The price is still supported by the 50-day EMA near ZAC 5,850, and the 200-day EMA is still sloping upwards at around ZAC 5,620. There’s a key resistance zone near ZAC 6,350, followed by a channel projection up to ZAC 6,540. The RSI has bounced back up to 60, which is a good sign – it means that momentum is picking up but isn’t overbought yet.
Trade idea: If the price pulls back to around ZAC 5,905, take a chance and buy it, aiming for ZAC 6,350 and setting your stop loss below ZAC 5,620.
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