Following a strong but concentrated 42% rally in 2025 (Figure 1), investors are questioning whether SA equities have meaningful further upside in 2026. The answer lies in the interplay of global and local dynamics, with the market’s diversity and resilience standing out as key strengths. SA equities benefited from a weaker dollar, renewed appetite for emerging markets (EMs), earnings resilience, an improving sovereign credit rating trajectory and reform momentum. Economic growth is shifting from structural weakness towards gradual recovery, even if politics remains a constraint.
Material risks persist, including domestic political uncertainty, global headwinds, and volatility in US statecraft. The rand performed strongly in 2025 and has scope for further gains in 2026 if macro fundamentals hold up. Against this backdrop, the bias leans towards a cautiously optimistic stance, but selectivity and discipline are essential in navigating upside opportunities and downside risks.
The local economy is undergoing recalibration, assisted by the adoption of a lower inflation target and supported by strong external tailwinds. While still weak by EM standards, growth is expected to accelerate modestly in 2026, aided by rate cuts and benign inflation, with a stronger recovery dependent on ongoing energy and logistics reform. Improving fiscal prospects and the attendant sovereign credit rating upgrade mark progress, but structural constraints remain binding. Low potential growth, high unemployment, and fragile fiscal metrics continue to weigh on the outlook, while upcoming local government elections add political uncertainty. The balance between cyclical drivers and structural headwinds will determine whether the SA economy can sustain its recent momentum.
SA Inc. finished the year lagging the broader equity market, constrained by muted foreign inflows as investors awaited clearer signs of recovery and reform. Yet sentiment showed signs of turning, highlighted by SA banks’ 21% total returns in 4Q25. The rally’s next phase will require broadening impetus beyond last year’s leaders, which included Precious Metal Miners, Technology, and Telecoms.
Momentum in earnings growth should be underpinned by monetary policy easing, with cooling inflation, stronger household spending, and rising consumer loan growth translating into healthier fundamentals. Valuations are still attractive, with domestic stocks trading near the lower end of historical ranges (Figure 2).
Average P/E of SA Inc Sectors is calculated as the simple average of the PEs of Banks, Retailers, Food Producers, Consumer Staples, Real Estate, and Industrials P/E indices at each point in time
Source: FactSet, Terebinth Capital
SA Inc sector opportunities: Selectivity amidst better growth prospects
The SA real estate sector should benefit from the economic recovery, with stronger tenant performance and rising demand amid limited supply. Lower inflation and falling interest rates will ease costs, supporting earnings growth. The latest reporting season confirmed improved real estate fundamentals and compelling prospects for the year ahead.
Notwithstanding the recent robust performance by SA banks, they are still attractively valued. The big four rerated sharply in 4Q25, with the average Price-to-Book ratio now above its 10‑year average. However, this still lags the move in the SA 10‑year bond yield and earnings prospects are promising. A favourable macro cycle – supportive terms of trade, USD weakness, and an improving fiscal position – alongside reform progress and rising credit utilisation should support earnings.
Consumer stocks show mixed prospects. Food retailers have invested in pricing to drive volumes, undercutting official food inflation. Shoprite is best placed to withstand low food inflation, while peers face profitability challenges. Among food producers, Tiger Brands’ turnaround highlights improved execution, while AVI offers stronger growth and attractive valuations.
The market’s other engine: Resources and AI beneficiaries
The resources sector remains central to equity opportunities, offering exposure to gold, platinum group metals (PGMs), and diversified miners aligned with global themes (Figure 3). While 2025’s parabolic gains in precious metals are unlikely to be repeated in 2026, the medium‑term backdrop is favourable.
Gold continues to shine as geopolitical risks, central bank diversification, and the debasement trade drive demand. Appetite has been consistently strong, with gold serving as both a safe‑haven asset and a hedge against fiat currency debasement. A supportive or even range‑bound gold price implies miners’ margins can expand through cost discipline and efficiency gains. Institutional and retail investors are increasingly allocating to gold and cheaper alternatives such as platinum and silver.
Diversified miners are increasingly positioned as beneficiaries of the green transition, with copper, iron ore, and manganese playing critical roles in renewable energy, electric vehicles, and battery storage. The Anglo American-Teck merger has created a copper powerhouse, while Rio Tinto and Glencore have restarted merger talks to build scale in critical minerals. Meanwhile, BHP’s record copper output exceeded 2 Mt in 2025, underscoring copper’s growing contribution to its revenue mix.
Tech exposure is a distinctive strength of the SA equity market, with Naspers (NPN) and Prosus (PRX) providing built‑in access to Tencent. This indirect holding gives local investors exposure to one of Asia’s leading internet platforms, which combines robust fundamentals with emerging AI themes, particularly in advertising algorithms, gaming, cloud services, and investments in agentic AI applications. The risks for SA investors are largely channeled through NPN/PRX, as they are the primary listed vehicles for accessing Tencent’s long‑term growth, with downside risks linked to EM sentiment, Chinese regulation, and governance factors at Tencent. The recent pullback and relative underperformance versus Chinese technology peers could present a compelling entry point.
SA equities embody both opportunity and risk, balancing domestic reform progress with shifting global currents in a small but open capital market. Despite being historically more sensitive to external shocks than local tailwinds, the market’s resilience, supportive currency dynamics, and sector diversity offer cautious optimism for 2026. While disciplined investment requires selectivity, the burning question for SA equity prospects in 2026 is will investors broaden conviction beyond last year’s leaders?
