South Africa’s markets have always been highly news-sensitive. Local investors watch the South African Reserve Bank (SARB), Eskom load-shedding updates, inflation figures, and global events such as U.S. interest-rate decisions, Chinese growth data or geopolitical events. Yet market responses are rarely perfectly rational. Over the past decade, behavioural finance has shown that biases, including loss aversion, herding, overconfidence and narrative-driven sentiment, shape trading on the JSE in ways that can create both short-term mispricing and longer-term opportunities.
Loss aversion: Bad news hits harder
Investors dislike losses more than they enjoy equivalent gains. This “loss aversion” means negative surprises often trigger bigger price moves than positive ones of similar size. A 2021 study of JSE trading statement announcements found share prices react more sharply to negative earnings guidance than to positive updates (Bhana, 2021). Volatility also spikes when policy uncertainty rises, such as during the COVID-19 pandemic and more recent fiscal-policy debates (Ramakau et al., 2025). This pattern echoes global work on “negativity bias”, but is especially visible in South Africa when headlines involve power cuts, fiscal slippage or credit-rating warnings.
Herding and overreaction around policy moves
South African equities often display herding, i.e. investors crowding into the same trades, when SARB policy meetings or big budget announcements loom. Research using 2018-2023 JSE data found increased return co-movements around monetary policy windows, suggesting investors trade together rather than independently assessing fundamentals (Sibande, 2024). This can lead to overreaction: prices move sharply on announcement day, then partially reverse as the true impact of the policy becomes clearer.
Underreaction and post-announcement drift
Not all news triggers instant price adjustment. Studies of the JSE’s semi-strong efficiency show some delayed reaction to firm-specific disclosures and macro data (Heymans & Santana, 2018; Enow & Briggs, 2022). Underreaction—when prices move too little initially—often gives way to “post-announcement drift”. For example, during the pandemic, some healthcare and industrial stocks rose slowly after positive operational updates, rewarding investors who bought after the first muted response (Enow & Briggs, 2022).
Global data dominate — sometimes too much
South Africa is highly integrated with global capital flows. U.S. macroeconomic announcements (example: jobs data, inflation prints, Fed commentary) regularly move the Rand and the JSE beyond what local fundamentals alone would justify. Alfonso (2023) found that JSE returns and volatility respond significantly to U.S. macro news, reflecting investors’ focus on global signals even when domestic conditions differ. This “salience bias” can cause local assets to overshoot on foreign headlines.
Energy shocks and availability bias
Few factors influence South African sentiment like electricity. Investors tend to overweight salient, easily recalled risks such as load-shedding. A recent study linked Eskom outage announcements to sector-specific volatility: mining and retail sold off quickly, while telecoms and exporters were steadier (Obalade, 2024). The easing of power cuts in 2024/25, widely reported in the media (Reuters, 2024; 2025), sparked a risk-on tone that lifted domestic cyclicals even before sustained earnings improvements were visible.
Media tone and investor sentiment
In a digital news era, tone matters. Research shows that negative media sentiment can push prices down in the short run, particularly for hard-to-value or illiquid stocks, before mean reversion occurs (Tetlock, 2007; updated evidence in South African context by Sibande, 2023). Local brokers increasingly track text-based sentiment indices to gauge when news tone diverges from fundamentals.
Implications for market participants
South African markets will always swing with the headlines, but the real edge comes from recognising when emotion and not fundamentals is in charge. Investors who stay calm during fear-driven sell-offs or euphoric rallies, and refocus on cash-flow impact and valuation once the dust settles, are better placed to avoid costly missteps and capture opportunities when markets overshoot.
References
- Alfonso, C.V. (2023) ‘The impact of United States macroeconomic news announcements on the Johannesburg Stock Exchange’, Acta Commercii, 23(1).
- Bhana, N. (2021) ‘Market reaction to trading statements released by companies listed on the Johannesburg Stock Exchange’, Journal of Contemporary Management, 18(2), pp. 1–22.
- Enow, S.T. and Briggs, A. (2022) ‘Investor reaction to COVID-19 news: Evidence from the Johannesburg Stock Exchange’, Investment Analysts Journal, 51(4), pp. 327-341.
- Heymans, A. and Santana, N. (2018) ‘How efficient is the Johannesburg Stock Exchange really?’, South African Journal of Economic and Management Sciences, 21(1), a1708.
- Obalade, A.A. (2024) ‘Blackouts and stock markets: Evidence from load-shedding in South Africa’, Finance Research Letters, 67, 104277.
- Ramakau, T., Mokatsanyane, D., Matlhaku, K. and Ferreira-Schenk, S. (2025) ‘Analysing South African equity market volatility and economic policy uncertainty during COVID-19’, Economies, 13(10), 276.
- Reuters (2024) ‘South Africa’s Eskom reports $3 billion loss on transmission unit split’, 19 December.
- Reuters (2025) ‘South Africa’s Eskom records first full-year profit in eight years’, 30 September.
- Sibande, X. (2023) ‘Monetary policy announcements and media tone in South Africa’, South African Journal of Economic and Management Sciences, 26(1).
- Sibande, X. (2024) ‘Herding behaviour and monetary policy: Evidence from the South African market’, Journal of Behavioral and Experimental Finance, 41, 100881.
