Trading update : 18 December 2025

Market sentiment for 2026 is gathering around a “pivot to value” theme as global inflation pressures finally peak and central banks signal a steady, albeit cautious, path toward interest rate cuts.

While retail giants like Costco thrive on price-sensitive consumers and the EU offers a lifeline to traditional automakers by softening sustainability policies around electric vehicle (EV) sales, there are various risks to consider. For South African investors, the storyline is a split between structural reforms and port privatisation, which offer long-term hope for emerging market (EM) outperformance, yet individual holdings pose risks and opportunities.

Navigating the year ahead will require balancing the optimism of a “neutral” interest rate environment against the reality of strained corporate balance sheets.

Peak tariff passthrough

One notable takeaway from November’s US CPI report, which includes partial data for October, is that inflation in most tariff-exposed goods categories is peaking or has already peaked. According to a Bloomberg report, after raising prices for goods in October, businesses lowered them in November amid holiday sales events.

Food-price growth slowed sharply in both months. Even as autos and related goods continue to show lingering signs of inflation, the data overall confirm Fed Chair Jerome Powell’s expectation that, thanks to the absence of additional tariffs, core goods prices are on track to peak early next year.

Headline CPI index to rise 0.32% in November (vs. 0.31% in September) and the core to print 0.23% (same as September). On a year-over-year basis, both headline and core CPI to remain at 3.0% in November.

Room to trim

Federal Reserve Governor Christopher Waller backed further interest rate cuts to get the central bank’s setting back to neutral, while saying policymakers need not rush to do so.

Quoted by Bloomberg, Waller outlined a scenario where inflation continues to slow through 2026, with monetary policy settings up to 100 basis points above neutral — the level where the Fed is neither restraining growth nor stoking price pressures.

Shake it off

After shaking off tariffs, China will maintain economic support but refrain from ramping up stimulus next year, according to an official readout from the Central Economic Work Conference.

The leadership will “flexibly and efficiently” use interest rate and reserve requirement cuts to ensure sufficient liquidity, and maintain a “necessary” level of budget deficit and government spending in 2026.

Ready to combust

The European Union (EU) is set to propose softening emissions rules for new cars, scrapping an effective ban on combustion engines following months of pressure from the automotive industry.

Bloomberg reports that the proposal will allow carmakers to slow the rollout of electric vehicles (EVs) in Europe and align the region more closely with the US, where President Donald Trump is tearing up efficiency standards for cars put in place by the previous administration.

Globally, automakers are struggling to make the shift profitable, with Ford Motor Co. (F-NASQ) announcing it will take $19.5 billion in charges tied to a sweeping overhaul of its EV business.

Value hunters

In a sign that price-sensitive US shoppers continue to search for value, Costco Wholesale Corp.’s (COST-NASQ) quarterly profits rose more than expected.

The nation’s largest warehouse club operator said it generated earnings of $4.50 per share in its fiscal Q1, which is 22 cents higher than what Wall Street analysts were anticipating, according to a Bloomberg report.

The results reflect a continuation of strong sales growth at retailer Costco as it attracts shoppers with ever-changing deals, larger pack sizes, and the popular Kirkland brand. Its customers also tend to be more insulated from economic swings because they are relatively affluent and pay a membership fee to shop there.

JPMorgan eyes emerging markets

According to JPMorgan strategists, emerging market stocks look set to outperform developed market peers next year as they still offer discounted valuations and should benefit from low positioning as well as from a stable or weaker dollar.

However, a Bloomberg report highlighted a handful of countries where rates are still very high, which is providing a cushion for anchoring more inflows, citing Brazil, Colombia, Mexico, South Africa, and India as examples.

Reforms paying off

The International Monetary Fund (IMF) expects South Africa’s ongoing electricity and logistics reforms to boost investment over the medium run, with growth projected to reach 1.8% by the end of the decade.

However, risks remain tilted to the downside, with weaker-than-expected global activity and an abrupt global financial market correction posing potential threats.

In view of the move to a new lower inflation target, inflation is projected to average 3.3% and 3.6% in 2025 and 2026, before settling to 3% by end-2027 and beyond.

KAP Jumps Most in Three Months on Earnings Improvement

KAP Limited (KAP-JSE) rose as much as 13% – the most since August 29 after the logistics company said the effects of issues affecting group performance have eased. Bloomberg reported that the group delivered an increase in Ebitda, operating profit, and earnings during the five months through November 30.

Metair mayday

The European Commission’s €20.2 million (approx. R400 million) fine against Metair’s (MTA-JSE) subsidiary, Rombat, introduces a significant headwind for retail investors, particularly as it follows a period of complex debt restructuring and no dividend declarations.

While the fine can be paid in instalments over 51 months, the initial €4.2 million payment due in early 2026 will further strain a cash position that recently saw a sharp decline to R143 million.

Because Metair is held “jointly and severally liable” for €11.6 million of the total, the group’s overall liquidity and its ability to resume dividends are now under renewed pressure. Investors should brace for potential volatility as the board evaluates legal appeals and the fine’s impact on existing bank covenants.

Privatisation push 

South African port and logistics firm Transnet SOC Ltd. signed a concession agreement with a company headed by Filipino billionaire Enrique Razon to expand the main terminal at the continent’s top container hub in Durban.

According to Bloomberg, the signing of South Africa’s first port-privatisation deal comes two years after Transnet awarded International Container Terminal Services Inc. the right to buy almost half of Container Terminal Pier 2 and manage the facility for 25 years.

Razon’s firm will spend about R11 billion ($647 million) on its plans.