The JSE delivered remarkable returns for the first half of 2025, outperforming most stock markets in other developed and developing markets alike. The All Share Index (ALSI) was up 16.7% in rand terms and 24.26% in US dollars for the six months to June 30, well ahead of the dollar returns of the S&P 500 (6.2%) and the MSCI World Index (9.75%).
This positions the dollar return of JSE ahead of the MSCI EM Latin American Index (up 17.87 %) and the Hang Seng (up 18.57%), as one of the top gainers for the year. What makes this feat even more noteworthy is that there is an increasing disconnect between the JSE’s year-to-date returns and the real performance of the South African economy.
GDP grew just 0.1% in the first quarter of 2025 and is expected to expand by just 1% or so for the full year. This sluggish performance continues a long trend of underachievement. South Africa’s economic growth has averaged less than 1% a year for over a decade, held back by poor government policies, load shedding, weak investment, and structural constraints.
Indeed, with GDP per capita slipping and economic growth falling behind the expansion of the population, South Africa’s economic situation is grim, but scratch deeper into the numbers behind the JSE’s rally, and it becomes clear that the JSE’s exuberance this year is all about commodities and the performance of certain offshore-focused companies on the bourse.
A cyclical boom lifts the ALSI
A cyclical boom in certain precious metals is the single biggest tailwind to benefit the JSE thus far in 2025. At the mid-year mark, precious metals, gold and platinum had surged by 26.25% and 50.8% in dollar terms, with palladium having gained 47%. The precious metals and mining sector of the JSE has soared nearly 76% in rand terms, lifting the Resources Index by 45% in rands and 54% as measured in dollars.
Some of the star performers in resources for the first six months of 2025 include:
- Sibanye-Stillwater (+115%)
- Northam Platinum (+97%)
- AngloGold Ashanti (+90%)
- Impala Platinum (+81%)
- Gold Fields (+68%)
- Harmony Gold (+62%)
Outside of the resources sector, the JSE’s performance was heavily influenced by the performance of a handful of heavyweight stocks that derive large shares of their revenues offshore. These shares include Prosus and its parent company, Naspers (both up 32% in the first half), MTN Group (up 53%), and Anheuser-Busch InBev (ABI) (which was up by about 30%).
This set of companies generate the bulk of their profits offshore, and their share price movements are driven by global rather than local factors. When Tencent rallies or ABI posts strong international results, it lifts the entire JSE index, even if the South African economy remains stagnant.
The rand/dollar exchange has also had a bearing on JSE performance for the first half of 2025 relative to its US counterparts. The rand strengthened 6.1% against the greenback this year, but that’s largely due to broad-based dollar weakness. The dollar fell by 10.47% against developed market peers in the first half of 2025, which implies that the rand has actually weakened slightly against the euro, pound, and others.
SA Inc is struggling
When we turn our focus to the SA Inc shares most exposed to the domestic economy, performance is considerably less rosy. Financials (up 3.12%), retailers (down 17.88%), consumer discretionary (down 6.65%), and listed property (up only 2.58%) all paint a picture of a struggling economy.
The fact that banks were only up 1.29% for the first half is telling, given their role as a proxy for domestic sentiment. The midcap (up only 8.47%) and small cap (down 0.59%) indices, which are more exposed to the South African economy than large cap stocks, reflect a reality of constrained household spending, poor business confidence, and low fixed investment.
While many investors are enjoying healthy returns from the JSE so far this year, it is important to remain mindful that the stock exchange has decoupled from the health of the South African economy. The JSE is reaping the benefit of a cyclical upswing in commodities and from a few global giants with limited direct impact on domestic employment, investment, consumer spending, or indeed, even the fiscus in certain instances.
In addition, it has often been suggested that the JSE companies are so cheap that they have priced in the South African-specific risks, but it is evident from the above that it is not the cheap SA Inc businesses that are providing the returns.
The 10-year picture is more telling with the JSE having returned 162% cumulatively as of 30 June, versus the MSCI at 322%, when both are expressed in rand terms.
