Could this be 2026’s hottest stock market?
Global equity markets were dominated by US tech stocks this year, with indices whipsawing as investors either piled money into markets or abruptly pulled out depending on the strength of AI sentiment.
The Nasdaq rocketed up 19.5 per cent, hitting its peak of $23,958.47 (£17,949.09) in October, while Trump’s ‘Liberation Day’ caused the index to hit its lowest point of $15,267.91.
While the S&P 500 is up 16.1 per cent this year to date, reaching its peak in December at $689.64, while the index also felt the burn of Trump’s tariffs hitting $493.64 in April.
But fears of the ‘AI bubble’ reaching its peak have been gathering speed over the past six months, prompting many portfolio managers to diversify elsewhere in a bid to weaken risks.
Popular locations include East Asian giant South Korea, whose Kospi stock market is up a staggering 66.7 per cent this year to date, bolstered by tech stocks such as Samsung SK Hynix, which are detached from the US frenzy.
But other markets, which have been flying under the radar, are creeping into portfolio managers’ eyeline, and while many are looking at opportunities in South America and Asia, one region is tipped to be a potential shock index next year.
South Africa
South Africa’s Johannesburg Stock Exchange has seen shares jump 12.6 per cent this year to date, to R134.45 (£6.02).
While the country typically only makes up a small portion of many asset managers’ portfolios, and accounts for roughly just 0.4 per cent of global equity markets, it offers a different value proposition than other emerging markets due to its heightened exposure to mining stocks.
Russ Mould, investment director at AJ Bell, said: “South Africa is one of the five best performing stock markets in the world in 2025, along with South Korea, Colombia, Greece and Poland.
“Investors gravitated away from developed markets, and particularly the USA, at least to some degree on the grounds of lower valuations relative to historic ranges, dollar weakness and commodity price strength.
“The last named two are, traditionally, seen as positive for emerging markets, and commodity price strength definitely helps the JSE index, as the ten biggest stock-weightings in the benchmark feature no fewer than five miners.”
Mining exposure and banks
This includes gold mining company Gold Fields, which are up 182.4 per cent this year to date, trading at R740, while platinum miners Impala Platinum are up 114.8 per cent, reaching R228.60.
This is off the back of soaring gold and platinum prices this year, with gold rising by 70 per cent, reaching a record high of $4,398.21 in October, while platinum jumped 75 per cent, peaking at $1,831.30 in December.
However, some analysts worry that the rally has left precious metals “overvalued” and investing in larger, diversified companies is a better way to tap into the index.
Mining companies such BHP, Anglo American and Glencore have secondary listings on the JSE, trading at attractive valuations and offer wider mining opportunities.
South African banks have also emerged as a hidden gem for investors, despite broader economic challenges, trading at “reasonable valuations”, accounting for toward two thirds of the country’s financial index.
Former Standard Chartered subsidiary Standard Bank’s shares are up 26 per cent this year to date to R280.49, while rival First Rand recorded a 14.6 per cent rise to R87.49 .
Political upheaval and currency
The country has also experienced a period of significant political change following the May 2024 general election, when the Government of National Unity (GNU) took office.
The coalition has been credited with restoring cautious optimism in the market, with government finances showing signs of improvement, while the rand and economic growth continue to slowly strengthen.
Mike Coop, chief investment officer of EMEA at Morningstar Wealth, also noted the central bank had done a “very good job in being proactive about dealing with inflation”, with inflation expectations for the next two years falling to a record low of 3.7 per cent in the South African Reserve Bank (SARB) quarterly bulletin.
The bank also noted that the new target will help anchor inflation expectations at a lower level over the medium term, as well as boost prospects of permanently lower interest rates.
The bulletin said that “this should encourage fixed investment and support stronger long-term economic growth”.
Don’t throw all your eggs in one basket
While the market has the potential to run in 2026, analysts have warned international investors against placing a large amount of capital into the market, with Morningstar only allocating three per cent of emerging market index funds into the JSE.
Mould said: “Challenges remain, notably allegations of corruption and widespread crime, while inflation has been sticky and the interest bill on government debt is still a drain on vital resources.
“Further declines in interest rates and bond yields would help here.”