Jan-Daniël Klopper

For the start of the fourth quarter, Mentenova maintains a moderately overweight position in South African nominal bonds, driven by attractive valuations, the onset of the rate-cutting cycle, and a peaking U.S. dollar. South Africa's inflation softened to 4.4% in August, slightly widening the SA-US inflation differential, further supporting bond yields. Foreign investment in SA bonds continues to rise, with net inflows increasing to USD 1.1 billion for the quarter, as the market remains optimistic about a domestic economic recovery.

Additionally, SA bonds offer compelling value relative to other emerging markets due to easing inflation pressures and favorable currency-hedged yields.

We also maintain a moderately overweight position in SA equities, supported by improving political and macroeconomic conditions, attractive valuations, and emerging market strength amidst dollar weakness. Foreign investor interest in local equities is improving and anticipates further gains as the domestic economy stabilizes.

The outlook on the rand is cautiously neutral, with expectations of further strengthening against the USD. Meanwhile, Mentenova has shifted from a moderately underweight to a neutral position in offshore bonds due to attractive yields but uncertainty around the U.S. economic outlook following the Federal Reserve’s recent rate cut.