Following two consecutive quarters of negative returns, the JSE finished the year in a constructive manner with the JSE All Share Index returning 15.2% in the final quarter. All major domestic sectors delivered pleasing returns with the JSE Resource, Industrial and Financial Indices returning 16.1%, 15.7% and 12.9% respectively during the quarter. The strong closing quarter helped the JSE end in positive territory for the calendar year with a return of 3.6%.

Pleasing final quarter returns were achieved despite continued weak sentiment in the global equity environment with continued concerns over inflationary pressures (and interest rate increases) weighing. In the domestic environment, consumers (and domestic companies) faced 200 days of load shedding during the year, an all time high. Towards the end of the quarter, and following domestic protest action, the Chinese government took significant steps to dismantle their restrictive ‘Covid-zero’ policies and ‘reopen’ the economy.

Looking ahead to 2023, the US Fed appears close to the end of their interest rate hiking cycle, with US and global growth slowing because of tighter monetary policy. The reopening of the Chinese economy is expected to support an economic recovery (with positive implications for a number of key fund holdings). On the domestic front, higher interest rates and load shedding, which is expected to continue into 2023, will continue to be a head wind for economic growth and consumer sentiment. With valuations across the JSE remaining broadly attractive, investee company balance sheets and cash flows in healthy positions, and the rate hiking cycle nearing its peak, we are constructive on the outlook for our investee companies in 2023.