JSE 2022 Market Wrap

It was a challenging year for the financial markets, filled with highs, lows, and surprises, like the best-performing share on the JSE in 2022.

SA Market Roundup 2022

The beginning of 2022 marked a financial year in which South Africans came to grips with COVID-19 without having to hinder economic activity. After contracting by approximately 0.7% in the second quarter of 2022, real gross domestic product (GDP) expanded by 1.6% in the third quarter. The size of the South African economy now stands at levels greater than those seen before the onset of the global pandemic, whereby real GDP came in at R1 161 billion (measured in 2015 constant prices) relative to the former peak of R1 152 billion in the fourth quarter of 2018. The COVID-19 pandemic thwarted economic activity for close to two years, and after a short-lived recovery in the first quarter of 2022, real GDP contracted by 0.7%, mainly due to the Kwa-Zulu-Natal floods. Following the brief contraction, real GDP recovered to its highest quarterly level in the third quarter of 2022.

Rising prices have been on everyone’s radar in 2022, with global inflation reaching highs not seen in over forty years. South African annual inflation peaked at 7.8% in July 2022 but has since moderated to 7.4% in November, down from 7.6% in October. To curb the high price levels, the South African Reserve Bank (SARB) adopted an aggressive monetary policy stance, increasing the repurchase rate to 7% and the prime rate to 10.5% in its latest MPC meeting. The key rate currently stands at levels not seen in over five years. Forecasts are that inflation is expected to remain above the central bank’s upper end of the target range until the second quarter of 2023 and remain above the mid-range target level of 4.5% until the second quarter of 2024.

With 2022 being marked with rising costs of living, blackouts associated with the ongoing energy crisis, supply chain disruptions and political instability, the year has been filled with uncertainty for most investors. Nevertheless, a handful of JSE stocks have performed exceptionally well in 2022.

Best and Worst Performers on the JSE in 2022

Top JSE shares in 2022

ABSA Group Limited (JSE: ABG) came in as the top-performing stock on the JSE, up over 50% for the year, mainly due to a strong earnings report, superior market presence and a relatively lower P/E ratio indicating potential undervaluation. Glencore PLC (JSE: GLN) came in as a close second, slightly underperforming ABSA but still up over 50% in 2022. Exxaro Resources Limited (JSE: EXX) ranked third on the list of top-performing stocks on the JSE, up just under 49% for the year, followed by Investec Plc (JSE: INP) and Standard Bank Group Limited (JSE: SBK).

ABSA‘s headline earnings figure increased by 27% in the first half of 2022, demonstrating a sound and robust recovery from the lows experienced amidst the COVID-19 pandemic outbreak. With a strong market presence and rising interest rates, 2022 fared well for the group. Glencore ranks second in the list of top-performing JSE stocks for the year, with its 2022 half-year report exhibiting healthy overall financial performance. In US dollar terms, revenue increased by 43% year-on-year for the six months ended 30 June 2022, while basic earnings per share increased by a stellar 820% for the same period. Furthermore, Glencore’s net debt figure declined by 78% year-on-year, improving the group’s overall financial health. Exxaro delivered a strong cash flow performance in 2022, with cash generated from operations increasing by 137% year-on-year to R9.4 billion for the six months ended 30 June 2022. The group’s net cash position increased from R764 million on 31 December 2021 to R5.7 billion on 30 June 2022, representing a 643% increase over a mere six-month period. Investec Plc and Standard Bank wrap up the list of the top five performing JSE stocks in 2022, mainly due to earnings increases associated with higher interest rates.

Worst Performing JSE shares in 2022

Aspen Pharmacare Holdings Limited (JSE: APN) comes in as the worst-performing stock on the JSE, down 40.5% in 2022, followed by Mr Price Group Limited (JSE: MRP), down 15% for the year. Prosus N.V (JSE: PRX), Mondi PLC (JSE: MNP) and MTN Group Limited (JSE: MTN) make up the remainder of the five worst-performing stocks on the JSE in 2022, down 14.8%, 14.5% and 12.9%, respectively.

Negative market sentiment pertaining to Aspen’s excessive debt levels continued to drive the share price down in 2022. Additionally, the pharmaceutical company announced that revenue for their year-end would be hindered due to the divestment of certain products. Disappointing interim results and missing internal targets resulted in Mr Price’s share price plunging by nearly 8% on Thursday, 24 November. The group’s recent lacklustre performance can be partially accredited to the rolling blackouts resulting in “more than 80 000 trading hours” being lost. Prosus delivered rather disappointing results in their interim financials for the year ended 30 September 2022. An 82% decline in earnings per ordinary share, from 1 007 US cents for the six months ended 30 September 2021 to 181 US cents for the six months 30 September 2022, would not have boosted overall market sentiment and investor confidence. Chinese tech giant, Tencent, has struggled to reach full operational capacity amid ongoing COVID-19 associated lockdowns, which has adversely affected the profitability of Prosus; having a 28% stake in the tech company. Multinational packaging and paper group Mondi, and mobile telecommunications company MTN, make up the remainder of the five worst-performing stocks on the JSE in 2022.

Take note that all share and economic data was taken on 23/12/2022.

Sources: Stats SA, SARB, JSE SENS, iol, ABSA Group Limited, Glencore PLC, Exxaro Resources Limited, Investec Plc, Standard Bank Group Limited, Aspen Pharmacare Holdings Limited, Mr Price Group Limited, Prosus N.V, Mondi PLC, MTN Group Limited, BusinessTech, Trading Economics.

Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.