Health Care and Consumer Discretionary Sectors Remain Vulnerable

• EM Health Care stocks continued to consolidate sharply in January, down 12.50%, by far the worst performing sector among EM equities.
• The HC sector has performed poorly since the start of H2 2021 following its strong performance after the Covid19 shocks. The chart below shows that HC is the second-worst performing sector in the past year, down nearly 31%.
• The rise in the US Dollar, the vulnerability of EM equities, a 'strong reversal' following sharp post-Covid gains could be some of the factors explaining the sharp consolidation in the 'expensive' health care stocks.
• Consumer Discretionary stocks also performed poorly in January, down 5.2% (third worst performing sector after IT).
• Consumer Discretionary remains the worst performing sector in the past year as consumer confidence indicators continue to stand at 'depressed' levels due to Covid uncertainty.
• On the other hand, momentum on financial stocks remained firm in January, mostly driven by the sharp rise in ST rates.
• Telecom and Energy sectors have been the two best performing sectors in the past year (up 23.6% and 20%, respectively). The strong recovery in oil prices and social distancing measures were the two major drivers behind the sectors’ outperformance.

Source: Bloomberg/MNI