An overview of factors that affected South African markets during December 2021 and the latest economic growth and unemployment indicators.
A rapid escalation in Covid-19 cases confirmed the onset of the fourth wave, though the country resisted stricter lockdown measures. With data indicating a moderation of case counts in the latter half of the month, South Africa further relaxed restrictions on movement and trade, including a removal of the curfew.
The Independent Communications Authority of South Africa (Icasa) reissued the invitation to apply for spectrum in an auction of about R8 billion, planned for March 2022. After numerous delays, the conclusion of this process would be a positive development for the economy, fiscus and consumers. In a positive development, credit ratings agency Fitch moved South Africa’s credit ratings outlook to stable from negative.
The economy recorded a quarterly GDP contraction of 1,5% (not annualised) in the third quarter – disappointing relative to market expectations. The devastating impact of the riots, as well as load-shedding, were the primary drivers. The unemployment rate recorded a new high of 34,9% in the third quarter, confirming the bleak picture many job seekers face.
Both Nedbank and Investec concluded the purchase of their outstanding listed preference shares in December, driving the preference share market to a strong end to the year, with the market gaining 6,5% in December.
This brings the full-year returns to 45,0%. The All-bond Index gained 2,7% in December, bringing the returns over the year to 8,4%. After a strong start to the year, the rand experienced a much weaker fourth quarter, depreciating by circa 6,0% and breaching the R16,00 mark multiple times in the last month of the year.
Local equity markets mirrored the positive momentum of global equity markets, with the FTSE/JSE all-share index gaining 4,8%. With resources delivering performance of 32,4% over the year, South African equity indices outperformed the broader emerging-market complex, delivering returns comparable to many developed markets. In December domestically exposed small- and mid-cap counters outperformed large-cap counterparts, while interest-rate-sensitive sectors such as property and financials finished the month up 7,9% and 9,1% respectively. The standout sector for 2021, however, was the energy sector, returning 112,2%.
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