JSE Top 40 Slips 0.15% on VAT Reversal—Can 83,421 Hold?

The JSE closed slightly lower on Thursday with the FTSE All Share Index down 0.15% to 89,708.37. The pullback comes after the government reversed its planned VAT hike – a move that was expected to raise R75 billion.

Finance Minister Enoch Godongwana had positioned the VAT increase as a key tool to stabilise public finances. But tensions within the ANC-DA coalition and legal hurdles forced a policy U-turn. The move has raised fresh concerns about SA’s ability to manage its deficit – especially with social spending pressures and weak revenue growth.

Treasury has committed to offsetting the gap with new expenditure cuts but details are vague. Investors will be watching to see if these plans hold up under parliamentary scrutiny.

Rand Firms as Inflation Softens

In the midst of the political turmoil the rand was a bright spot. It gained 0.2% to trade at 18.66 to the dollar as inflation softened.

Headline consumer inflation fell to 2.7% in March – below the expected 2.9% and the lowest print since mid-2020. A 8.8% decline in fuel prices and easing education costs was the main driver of the decline giving the SARB some room to breathe ahead of the May interest rate decision.

Key Figures:

• ZAR/USD: +0.2% to 18.66

• CPI YoY (March): 2.7% (vs 2.9% expected)

• Fuel Index: -8.8%

While this drop in inflation opens the door for a rate cut the SARB may still be cautious especially as the global outlook becomes more uncertain and the local currency is vulnerable to external shocks.

Technical Picture: 83,421 Is the Line in the Sand

The JSE Top 40 Index (SA40) is consolidating around 82,780 after bouncing from a well defined support range of 82,059 to 81,392. The 50 period EMA also sits in this area so it’s a key demand zone.For now the index is trading in a tight range with resistance at 83,421 acting as the technical ceiling. A close above this level with strong volume would likely confirm the breakout and open the way to 84,249 and 85,390.

Trade Setup to Watch:

• Entry Option 1: Bounce from 82,059 with bullish structure

• Entry Option 2: Breakout above 83,421 on strong volume

• Targets: 84,249 → 85,390

• Stop Loss: Below 81,392

The MACD histogram is flattening so bearish momentum may be running out of steam. Traders should wait for price action and volume confirmation before jumping in.

Global Winds Continue to Blow

External factors are still affecting local sentiment. In the US trade policy is fluid. The Biden administration is reviewing a reduction in tariffs on Chinese imports but Treasury Secretary Scott Bessent said any easing would require reciprocal concessions – adding more uncertainty to the timeline.

Meanwhile signs of slowing growth in the US are emerging. April’s S&P Global PMI fell to 51.2 – slower economic activity. With investors waiting for updated US jobless claims and durable goods figures global risk sentiment could shift again – and bring more volatility to SA markets.

Bottom Line

The JSE may be stuck in consolidation but the bigger picture is one of caution. Political turmoil, fiscal risks and global headwinds are keeping investors on edge. Still technicals suggest a breakout could be around the corner if markets can close above 83,421 with conviction.