IT and Health Care Are The Worst Performing EM Equity Sectors In 2022

• The constant deterioration in the global economic outlook combined with the elevated market uncertainty and the strong momentum on the US Dollar have been weighing on EM equities this year.
• MSCI EM Equity Index is down over 18% this year, particularly driven by the weakness in Asia (ex-Japan) and CEEMEA equities.
• IT and Health Care are the worst performing equity sectors, down 27% and 26%, respectively, since the beginning of 2022.
  • EM IT equities have been significantly impacted by the plunge in China tech companies due to the significant deceleration in the domestic real economy (zero-Covid policy) and the crackdowns on tech sector.

• We previously mentioned that we were leaving the energy sector on the side as we are not confident that the performance of the EM energy sub index reflects the performance of the sector given the significant rise in energy this year.
  • One explanation could be that all the losses occurred during the start of the Ukraine war, driven by the fall in Russia energy companies. Hence, MSCI new weighing following the collapse of Russian assets did not readjust the February/March losses, therefore the MSCI EM Energy sub-index still remains very low despite the positive bounce in energy stocks in most EM economies.

• It is interesting to see that the drawdown in EM financials has not been too significant considering that recession risks have been surging in recent weeks globally.

Source: Bloomberg/MNI.