South Africa's bank shares will be in the spotlight again this week after leading retail bank Absa confirmed it was in take-over talks, and investors also will focus on inflation data, traders said.
South African markets are closed on Friday for the Heritage Day holiday.
The banking index has surged nearly 30 percent this year, with Absa shares shooting up 45 percent and touching a fresh all-time peak on Thursday.
Absa released a statement on Thursday saying talks were underway about the acquisition of a controlling stake but gave no clue about the identity of its suitor or suitors.
"This rumour has been around for ages now and will be particularly positive if the bid is for a majority stake. Speculators will be disappointed if the new buyer does not take all of them out," said Warren Hammond of Andisa Securities.
Absa's biggest shareholder, insurance group Sanlam, said it would consider an offer for its 21 percent, worth around 8.5 billion rand ($1.3 billion).
Investment holding group Remgro and financial services firm Sage also have stakes in Absa, Hammond said. "We will be watching these three as well," he said.
Another trader said the confirmation of talks could dampen the rally in the banking sector.
"Could be the old story of buy on the rumour and sell on the fact ... that (rally) could end unless Absa generates more interest for the rest of the sector," the trader said.
The other major South African banks are Standard, FirstRand and Nedcor.
The wider market index pushed to its highest levels in over two years this week, partly fuelled by hopes that interest rates would be cut again.
Analysts said an expected slowing of the inflation rate in data due at 0930 GMT on Wednesday could add weight to that optimism.
A Reuters poll of 14 analysts forecast that the benchmark CPIX inflation rate would show an annual increase of 3.9 percent in August after rising 4.2 percent in July.
The Producer Price Index, released on Thursday is expected to show an annual rise of 1.4 percent for August, up from 0.7 percent in July.
"The market is already pricing in a cut when the central bank meets in October that could boost domestic stocks," the trader said.