The two-phase trade for SA Equities

研报英文原文证据摘录

The two-phase trade for SA Equities

Inga Q Galeni AC Global Markets Strategy

(27-11) 507-0335 18 June 2026 J P M O R G A N

inga.galeni@jpmorgan.com

The natural impulse is to assume a straight reversion to pre-February themes — weaker USD,

stronger EM inflows, higher precious metals. We'd push back on a mechanical read-across.

The USD/EM inflows dynamic is less obvious this cycle, and the more interesting expression

for SA is equities vs. bonds. Pre-war, SA equities were cheap relative to bonds — and that

gap was meaningful. Fixed income was already pricing in a set of structural catalysts (3%

inflation target, SOE reform, credit rating upgrades, improving fiscal dynamics), while

equities remained in a wait-and-see mode. In our note "Looking Beyond the Noise Lies a

Bullish South Africa Thesis", we laid out why the idiosyncratic SA macro drivers remain

intact. The growth pessimism that has anchored the SA equity debate — while entirely

justified over the past decade — is increasingly inconsistent with the structural shifts now

underway.

The reform agenda will compress SA bond yields as markets price better SOE performance,

monopoly restructuring, and a falling risk premium. Rate-sensitive SA Inc. sectors with

attractive ERPs are best positioned for a sustained rotation — conditional on delivering

credible EPS upgrade cycles. To operationalise relative value, we built an ERP proxy

comparing earnings yields to SA bond yields across the 5yr, 10yr, and 20yr term structures,

with EPS revisions layered in as a quality check. Looking at SA equities vs Bonds, we layout

three key highlights:

1. Food & Drug Retail — Expensive; Avoid Food & Drug screens as the most expensive

domestic sector vs. bonds with a challenged revision profile. The driver is structural,