Manufacturing Momentum Improving
The latest manufacturing data for January, while still showing a year-on-year contraction at -0.7%, is significantly better than the -1.4% we were anticipating. This suggests the industrial sector’s decline may be bottoming out, a notable shift from the deep struggles we witnessed throughout 2025. This positive surprise offers a window for tactical derivative plays. This data is the first potential green shoot after a difficult 2025, a year defined by severe power cuts and stubbornly high borrowing costs that crippled production. Given the slight but noticeable improvement in the energy supply we’ve seen since late last year, this manufacturing number could be the first sign of a recovery. We believe the market may be underpricing this potential turnaround. For currency traders, this could signal short-term strength for the Rand. We are looking at buying ZAR call options against the dollar, positioning for a move stronger than the 18.50 level we have seen recently. This mirrors the currency’s reaction in mid-2025 when better-than-expected current account data caused a similar, brief rally. On the equity side, this news could lift sentiment for the JSE Top 40 Index, particularly for industrial and manufacturing-linked stocks. Buying call options on the ALSI index for the next few weeks could capture a potential relief rally. We saw a similar sector-specific boost in the final quarter of 2025 when global commodity prices showed a temporary recovery.Risks And Trade Horizon
However, we must temper this optimism with a dose of reality, as this is just one data point. With unemployment figures from late 2025 still stuck above 32% and the South African Reserve Bank holding rates firm to combat inflation that remains near 5%, any long-term recovery is far from certain. Therefore, any positions taken should be tactical and short-dated. Create your live VT Markets account and start trading now.
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