World’s biggest bank backs South Africa

A move by JPMorgan Chase to diversify its flagship emerging-market index and divert investor flows away from heavyweight debt issuers like China and India could add more juice to South Africa’s bond rally.

Investors are already snapping up South African government bonds, with inflows totaling 41.3 billion rand last week, the biggest intraday level on record according to JSE Ltd. data. The cost of insuring the country’s debt against default has meanwhile plunged to the lowest in over seven years.

“Technical dynamics like this are certainly helpful for South African bonds, but effective investor positioning will ultimately be driven by the risk-adjusted return profile, and South Africa is currently very well positioned to capitalise on the potential change amid credible and bond-friendly local policy shifts,” said Adriaan du Toit, director of emerging-market credit research at AllianceBernstein.

JPMorgan will gradually lower the issuer cap on its GBI-EM Global Diversified index in the first half of 2026, according to a client notice seen by Bloomberg.

Along with South Africa, Thailand, Poland, and Brazil are among the biggest beneficiaries.

“The JPM EM index re-weighting adds fuel to the fire. South Africa stands to benefit from China/India downweights just as global EM allocators start rebalancing,” said Kristof Kruger, a fixed-income trader at Prescient Securities.

Yields on South Africa’s benchmark bonds extended declines on Tuesday, adding to the longest run since 2021. The yield fell 0.9 basis points to 9.21% as of 13:00 in Johannesburg, the lowest level in over seven years.

Kruger said he’s been long the rand and South African government bonds for weeks, especially at the long end. “This is just the next leg. Stay with it,” he said.