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2022: OUTLOOK FOR THE LOCAL INVESTMENT MARKET While always dependent on how the US and other developed-world economies fare, the South African financial market seems to be in a better position than some of its emerging-market peers for growth this year, writes MARTIN HESSE
INVESTORS in local shares have had their best year in almost a decade. The FTSE/JSE All-Share Index (Alsi) rose 24% in 2021, it’s best performance since 2012. The total-return index (the Alsi with distributions reinvested) rewarded investors with a stunning 29.2% return on their money. On the other hand, investors in cash saw their returns shrink as inflation reared its head. Can equity investors expect another bumper year in 2022? And what about the other asset classes? Delving into what financial experts are thinking, first a broader view of prospects for emerging markets. David Rees, senior emerging markets economist at London-based global investment house Schroders, says the threat of new Coronavirus
variants presents an ongoing risk, as the uncertainty around Omicron illustrates, and this could change the outlook quite dramatically. He says that while improved Covid outcomes should benefit services-based economies, especially those that rely heavily on tourism, there is no getting away from the fact that emergingmarket economic growth will be slower in 2022. “Many of the economies have already recovered to pre-pandemic levels, and this naturally makes it harder to sustain above-trend rates of growth,” Rees says. But he also cites some fundamental reasons for expected slower growth. These include a slowdown in global trade; a weaker outlook for China, which could lead to softer demand for
commodities supplied by emergingmarket economies such as ours; tighter monetary and fiscal policies by governments intent to repair the damage done to their budgets by the pandemic, and higher inflation. Business Report recently reported that the International Monetary Fund (IMF) warned emerging economies to prepare for US interest rate hikes, as the Omicron variant had raised additional concerns about inflation. The US inflation rate is expected to come in at 7% for December, a fourdecade high, and the markets are already betting on the US Federal Reserve raising rates earlier rather than later. IMF senior economists said the impact of the US tightening its monetary policy could be more
