Why we believe now is the time to top up on SA equity — JSE Capped All Share at 58,414 | 11 August 2026
The best entry points rarely feel comfortable
Markets tend to offer their best opportunities when enthusiasm is the lowest. The JSE Capped All Share Index (JCAPAL) rallied 11.2% from the start of the year to an all-time high of 64,370 in late February, before retracing to 58,414. It now sits 9.3% below that peak and is broadly flat year-to-date at +0.9% (Figure 1).
Critically, this has been a de-rating of price rather than a deterioration in fundamentals. Forward earnings expectations have held through the pullback, meaning the retracement has widened the valuation gap without a corresponding deterioration in the earnings outlook. To the investor watching prices, the market has stalled. To the investor watching value, it has become materially cheaper without fundamentals changing or becoming materially worse.
Figure 1: JCAPAL Index 9.3% off its record high, 2003–2026
Source: Bloomberg
The valuation case is unusually clear
The JCAPAL currently trades at 14.0x trailing earnings, compared with its long-run average of 15.2x, an 8.3% discount. The forward multiple is more compelling still, at just 10.7x expected earnings, highlighting the extent to which anticipated earnings growth is not yet reflected in current valuations (Figure 2).
A simple re-rating from 10.7x back to that historical average, with no additional contribution from earnings growth or dividends, would imply roughly 42% capital upside. Put plainly, the market is not asking investors to pay today for the earnings recovery analysts already forecast; it is paying them (investors) to wait for it. Let that sink in, you are being rewarded while you wait!
Figure 2: Earning multiple relative to long-term history
Source: Bloomberg
Long-run average represents the average trailing P/E since inception.
The earnings outlook has held
The distinction between price and fundamentals matters. There has been no earnings downgrade cycle accompanying the recent pullback. Instead, the spread between the trailing and forward P/E has widened to approximately 3.3x, compared with a long-run average nearer 1.2x. The lower forward multiple remains consistent with expectations for earnings growth despite the market's recent consolidation (Figure 3).
Across the 86 observations in our history, the JCAPAL valuation multiple ranged from approximately 6.2x to 23.2x and has repeatedly mean-reverted towards the mid-teens. Mean reversion is one of the few free lunches in the market in our opinion. The current discount should therefore not automatically be interpreted as a permanent feature of the market.
Figure 3: Trailing versus 12-month forward P/E, 2006–2026.
Source: Bloomberg
Why we are acting now
Layer a still-recovering domestic earnings base and a starting free cash flow yield well ahead of developed-market peers onto a 10.7x forward multiple, and the risk-reward on the South African listed equity market becomes increasingly asymmetric; much of the downside is reflected in current valuations, while the potential upside from an earnings recovery and re-rating is not yet fully priced.
We recognise that country and currency risk warrant some discount to global peers. Our contention is that, at current levels, the market is pricing in considerably more bad news than the underlying fundamentals suggest. Risks remain, particularly currency volatility, domestic policy execution and global risk appetite, but current valuations provide meaningful compensation for that.
Against this backdrop, the Arysteq SA Equity Fund continues to demonstrate the value of disciplined, active stock selection. Year to date, the Fund has returned 1.6%, outperforming its benchmark return of -1.7% by 3.3 percentage points, while over one year it has delivered 20.0% against the benchmark’s 18.2%. The Fund currently ranks 11th out of 65 funds within the ASISA South African Equity General peer group on Morningstar. While short-term market movements remain inherently difficult to predict, we believe current valuations continue to present a compelling opportunity for long-term investors, with the Fund well positioned to capture this potential through a disciplined, valuation-driven investment approach.
