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South African equities are having one of their best years on record, with the local MSCI index posting a return of over 50% year-to-date.<\/p>\n
This makes it the best-performing index among the MSCI regions, with it returning over 10% more than the second-placed MSCI China index.<\/p>\n
However, while the stock market is enjoying one of its best-ever years, the local economy remains largely stagnant with GDP growth below 1%.<\/p>\n
This is largely because many of the reasons why South African stocks are soaring are out of the country\u2019s control, with the rally based on rising commodity prices.<\/p>\n
Furthermore, many of the companies driving this return have significant operations outside of South Africa, ensuring that their performance is not heavily linked to that of the local economy.<\/p>\n
This is feedback from Melville Douglas chief investment officer Bernard Drotschie, who explained why local stocks have had such a strong year and why it does not necessarily point to a stronger performance from the local economy.<\/p>\n
Drotschie explained that 2025 has been a story of two JSEs, with a clear set of companies shooting the lights out and others having a relatively muted year so far.<\/p>\n
This split is largely on the lines of company exposure to the South African economy, with SA Inc stocks posting relatively poor returns compared to large multinationals listed on the JSE.<\/p>\n
SA Inc stocks are companies that are heavily exposed to the South African economy, relying on it for the vast majority of their earnings, like Mr Price and Capitec.<\/p>\n
Of the ten largest companies on the JSE, based on market capitalisation, only FirstRand and Capitec truly count as local companies, considering where most of their revenue is generated.<\/p>\n
This makes the performance of the JSE All Share and Top 40 Index, in particular, a bad proxy for analysing the broader economy.<\/p>\n
\u201cWe have to dive down to a more granular level to understand how the various components of an economy are working \u2013 or not working \u2013 and interacting with each other,\u201d Drotschie said.<\/p>\n
\u201cWhen we do this, we typically find paradoxes. South Africa is a case in point. GDP growth alone suggests a stagnant economy. However, if we turn to the stock market, we get a very different picture.\u201d<\/p>\n
The graph below shows the performance of various MSCI regions indices year-to-date, with South Africa producing the best returns so far.<\/p>\n
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From a bird\u2019s-eye view of the stock market, it looks like South Africa is getting everything right this year and is set for improved performance in the near future.<\/p>\n
Local assets have markedly outshined global peers, indicating increased investor interest in local stocks and bonds.<\/p>\n
However, on closer reflection, this return is driven by a narrow cohort of stocks that do not reflect the local economy to a large degree.<\/p>\n
Many of the companies driving the returns earn a majority of their revenue outside of South Africa and have seen external forces boost their performance.<\/p>\n
In particular, mining companies listed on the JSE have had a very strong year, with the Resources 10 index more than doubling so far in 2025.<\/p>\n
This has been driven by a record-high gold price and rising platinum group metals (PGMs) prices as investors search for safety amid heightened volatility and uncertainty.<\/p>\n
As a result, miners on the JSE have soared, with investors expecting a substantial pickup in profits from these companies as prices remain elevated.<\/p>\n
While South Africa is a relatively small gold producer, the JSE is still home to some of the world\u2019s largest miners of the precious metal.<\/p>\n
This has seen the resources index skyrocket and bolstered the performance of the Top 40 index and the All Share.<\/p>\n
South Africa only produces around 100 tonnes of gold a year, which is worth over $15 billion (R262 billion) at current prices.<\/p>\n
The country is much more prominent when it comes to the production of platinum, with South Africa being the largest producer of PGMs.<\/p>\n
As a result, JSE-listed miners such as Sibanye-Stillwater, Impala Platinum, Valterra (formerly Amplats), and Northam Platinum have had a strong 2025.<\/p>\n
The performance of these mining stocks has boosted the JSE\u2019s returns and is expected to bolster the government\u2019s tax revenue.<\/p>\n
South African equities are having one of their best years on record, with the local MSCI index posting a return of over 50% year-to-date. This…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-2084","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2084","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=2084"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2084\/revisions"}],"predecessor-version":[{"id":2087,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2084\/revisions\/2087"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=2084"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=2084"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=2084"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}