Our December Local Commentary
The JSE followed global stock markets lower (FTSE/JSE Capped SWIX -2.8% MoM), but despite this, it ended the year in positive territory (Capped SWIX +4.5% YoY) – one of a select few major global stock markets to eke out a gain for 2022. However, December’s stock market performance was looking decidedly worse mid-month as local politics added to the uncertainty. The ANC headed into its twice-a-decade leadership conference with the incumbent, President Cyril Ramaphosa, fighting off the threat of an impeachment vote and the possibility of needing to step aside as a result of criminal charges related to the theft (and subsequent handling thereof) of foreign currency from his Phala Phala game farm. The president managed to avoid any serious fallout from this alleged misconduct and won a second five-year term in charge of the ANC (and, by extension, likely the country). The composition of the remaining top leadership of the ANC seems to favour an extension of the investor-friendly policies we have seen under the president’s first term, and local markets responded well to the conference’s outcome.
Stocks geared towards the domestic economy were amongst the worst-performing in December (-6% MoM), while those companies with foreign earnings generally fared better despite a stronger local currency (rand +1% MoM vs the US dollar). Miners, particularly those with meaningful exposure to iron ore (+12.1% MoM), also fared slightly better (BHP +1% MoM, Kumba +2% MoM), though the most significant positive contribution to the local stock indices came via Naspers and Prosus (both +7% MoM), buoyed by a resurgence in the share price of their biggest underlying investment, Chinese tech conglomerate, Tencent. Sentiment towards Chinese investments continued to improve as the Chinese government rolled back policies related to the handling of COVID-19 infections that had hampered economic activity in the country, despite reports of increasing infections.
On the domestic economic front, inflation slowed less than anticipated and remained unacceptably high in categories such as transport (+15.3% YoY) and food and non-alcoholic beverages (+12.5% MoM). However, despite the worse-than-expected inflation data and generally higher global bond yields, local 10-year government bond yields ended the month largely unchanged (at 10.8%).
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