HSBC Asset Management said some emerging markets are moving into a more supportive long-term phase, and pointed to South Africa. It linked this to fiscal improvements, policy credibility, and market performance. South Africa’s latest budget projects primary surpluses rising over coming years. It also forecasts the debt-to-GDP ratio will peak for the first time in 17 years and then fall.

Budget Signals Improving Fiscal Outlook

The budget assumes stronger-than-expected revenues, which removes the need for tax rises. It also includes reduced long-term bond issuance. The IMF has noted improved policy credibility, progress on reforms, and macroeconomic stability. The report also refers to external conditions supporting the outlook. Higher commodity prices have improved the terms of trade. High real yields and central bank moves towards a lower inflation target have supported confidence. South Africa’s equities have risen over the past 12 months. The MSCI South Africa index is up 80% in US dollar terms.

Market Implications For Traders In 2026

Looking back at the structural bull case for South Africa that we saw in 2025, the optimism was based on fiscal discipline and strong commodity prices. The view then was that rising primary surpluses and a peaking debt-to-GDP ratio would create long-term appeal. That positive sentiment was reflected in the MSCI South Africa’s sharp rise in dollar terms during that period. However, the reality heading into March 2026 is that some of those tailwinds have weakened, creating volatility. The Rand has depreciated against the dollar, moving from around 17.50 in mid-2025 to over 19.00 recently, increasing the cost of hedging. This suggests that traders should consider buying USD/ZAR call options to protect against further currency weakness in the coming weeks. Inflation has also proven more persistent than anticipated, with the latest figures for January 2026 hovering at 5.9%, near the top of the central bank’s target range. This stickiness reduces the chances of an interest rate cut, which was a hope we held last year. Traders can use interest rate swaps to position for a “higher for longer” rate environment from the South African Reserve Bank. Furthermore, the commodity price boom that boosted terms of trade in 2025 has cooled, with platinum prices down over 10% from their 2025 peak. This directly impacts mining revenues and the country’s current account balance. We see this as an opportunity to use options on commodity-linked stocks, perhaps buying puts on miners that are heavily exposed to price fluctuations. The JSE Top 40 index has stalled after its strong 2025 run, and is down about 4% year-to-date in 2026, reflecting both local and global headwinds. This range-bound, slightly negative market makes it ideal for income-generating strategies. We believe writing covered calls against major index ETF holdings or large individual stocks can capture premium from the heightened volatility. Create your live VT Markets account and start trading now.

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