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iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022

iBoxx SGD Monthly Commentary: June 2022

S&P Latin America Equity Indices Quantitative Analysis Q2 2022

iBoxx USD Asia Ex-Japan Monthly Commentary: June 2022

iBoxx ALBI Monthly Commentary: June 2022

iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022

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Paulina Lichwa-Garcia

Associate Director, Fixed Income Indices

S&P Dow Jones Indices

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Florian Guth

Principal, EMEA Fixed Income Indices

S&P Dow Jones Indices

iBoxx Tadawul SAR Government Sukuk Index

While the iBoxx Tadawul SAR Government Index continued its negative performance in April and May, the returns started to recover in mid-June.  The big shift came after the Federal Reserve announced the biggest interest rate hike since 1994 (up 75 bps) on June 15, 2022.  This major Fed policy change alleviated inflation fears and helped the long end of the sukuk curve stage a recovery.  The long end of the sukuk curve registered the highest change quarter-over-quarter, while the short end of the sukuk curve performed better in a month-to-date comparison.

iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022 - Exhibit 1

iBoxx Tadawul SAR Government Sukuk Indices – Q2 2022 - Exhibit 2


iBoxx SGD Monthly Commentary: June 2022

June 2022 Performance

Persistent high inflation and monetary tightening have underscored a challenging global economic path ahead. The prospects of maintaining economic growth and waiting for inflation to subside without further hawkish action from central banks have come into question. Markets have responded with larger movements than have been seen in recent years. Major equity indexes have fallen into bear market territory, down over 20% from recent highs, while bonds have seemingly lost some of their diversification benefit in a stockbond mix.

In Singapore, the economy is expected to grow by 3.8% in 2022, down from the forecast of 4.0%, according to a recent survey by the Monetary Authority of Singapore. Meanwhile, the Straits Times Index sank 4.0% in June and was down 10% from its 52-week high. Not far behind in negative performance was the iBoxx Singapore Dollar (SGD) Overall Index, which fell 1.63% this month and has dropped 6.87% YTD.

All rating subindices fell into red, with the worst performance coming from sectors rated A and above. While losses were observed across the maturity buckets, the sharpest declines were seen in the mid-to-long end of the curve.

The sovereign and non-sovereign subindices suffered losses over 1% this month. The top performers were short-dated corporate bonds from Consumer Goods, Financial Services and Real Estate sectors. In contrast, the worst performers were long-dated bonds issued by the
Singapore government or one of Singapore’s statutory boards.

The overall index ended the month with a yield of 3.23% and a duration of 6.57 years.

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S&P Latin America Equity Indices Quantitative Analysis Q2 2022

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Michael Orzano

Senior Director, Global Equity Indices

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Silvia Kitchener

Director, Global Equity Indices, Latin America

S&P Latin America Equity Indices Commentary: Q2 2022

Following a stellar Q1 in which the S&P Latin America BMI jumped 25%, the regional equity market fell back to Earth as second-quarter losses more than offset first-quarter gains. However, the region remained a relatively bright spot compared to global equities more broadly, as the S&P Latin America BMI was only down 3.5% YTD compared with losses of around 20% YTD for the S&P 500 and S&P Global BMI.

Global inflation concerns, rising interest rates in the U.S., the Russia-Ukraine war and political uncertainty with new governments in Chile, Peru and, most recently, Colombia have finally caught up with the region. In addition, Brazil, the largest market in Latin America, will be holding presidential elections this year, contributing to further uncertainty.

From a country perspective, Chile had the best returns in Q2, with the flagship S&P IPSA gaining nearly 0.30% in CLP. The broader Chilean index, the S&P/CLX IGPA, did better with a 3.1% return for the same period. All other markets, in local currency, had negative returns for Q2.

No sector was unscathed in Q2. It is interesting to note that while Health Care (-42.1%), Consumer Discretionary (-40.0%) and I.T. (-39.1%) were the worst performers, they were not necessarily the main contributors to the quarterly losses. It’s more likely that sectors with large representation in the region, such as Financials, Materials and even Consumer Staples, which were down 25.3%, 21.0% and 13.8%, respectively, had the most significant impact on the downturn of the equity market.

Similarly, most of the losses were driven by Brazilian and Mexican companies, which together represent about 88% of the S&P Latin America BMI. The top 10 index constituents accounted for nearly one-third of the Q2 index decline. Brazilian companies Vale S.A., B3 S.A. and Itau Unibanco had the most significant impact on the index.

Though it is perhaps not surprising that the markets have taken a turn for the worse given the local political turmoil, rising inflation, the Russia-Ukraine war and the lingering effects of COVID-19, it is still disappointing to see the markets drop this sharply. While there is no telling where the bottom may be, volatility is likely to continue. Let’s hope the next turn will be an upswing.

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iBoxx USD Asia Ex-Japan Monthly Commentary: June 2022

June 2022 Commentary

Economic headwinds from high inflation and the impact of monetary contraction policies continued to pressure financial markets in June. In the U.S., investor sentiment shifted after the Federal Reserve delivered a rate hike of 75 bps, a significant increase not seen since 1994. The underlying narrative has broadened from concerns around high inflation and aggressive rate hikes to also include growth worries and recession anxiety. The 2s10s spread of the U.S. Treasury curve flattened dramatically in June, perhaps reflecting an outlook for weaker economic growth on the horizon. Both stocks and bonds in developed markets declined this month.

The iBoxx USD Asia ex-Japan Index dropped 2.28% in June and 10.2% YTD. Moreover, the index yield rose 0.52 bps to 5.83%, and the index spread widened 32 bps to 273 bps. Additionally, the cost of hedging this market from credit defaults, as tracked by iTraxx Asia exJapan Index (5Y), has risen to levels last seen in April 2020.

This month, negative performances were generally observed across maturity buckets. While the investment-grade (IG) and high-yield (HY) subindices fell in the red, the IG subindex outperformed its HY counterpart by 0.75%. Notably, losses increased in severity when descending from the BBB segment into the HY rating segments.

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iBoxx ALBI Monthly Commentary: June 2022

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Kangwei Yang

Director, Fixed Income Product Management

S&P Dow Jones Indices

June 2022 Commentary

Not since 1994 have we seen a rate hike of 75 bps by the FOMC as announced on June 15, 2022—its third hike this year. Many saw this rate hike as an affirmative and decisive move by the Fed to combat the highest inflation the U.S. economy has seen in decades. Through June, the 10-2 Year U.S treasury yield spread narrowed from 0.32% to 0.06%, signaling continued flattening of the yield curve, which might indicate poor sentiments in the near-term economy outlook.

The S&P 500® recovered slightly from losses in the first half of June but still ended the month with a 8.39% decline. U.S. Treasuries—proxied by the iBoxx USD Treasuries—were relatively flat, while U.S. TIPS—represented by the iBoxx TIPS Inflation-Linked Index—were up 0.97%.

In Asian fixed income, the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD) lost 2.80%, with losses in 8 of the 11 sub-markets. South Korea (-2.58%), Singapore (-1.75%) and Hong Kong (-1.42%) were the bottom three performers, while only India (up 0.45%), Indonesia (up 0.20%) and China Offshore (up 0.06%) recorded gains in local currency terms in June.

Most parts of the yield curve across the individual markets saw red this month, with the largest losses concentrated in the long end. The South Korea 10+ Year (-5.01%), Singapore 10+ Year (-3.76%) and Hong Kong 10+ Year (-3.26%) were the hardest hit. India, on the other hand, was
the only market that saw gains across maturity bands.

Yields (in semiannual terms) rose in every market in June. As a result, the average index yield rose 22 bps to 4.22%. The largest uptick came from Hong Kong (up 40 bps), which, as of June 30, 2022, offered an average yield of 3.82%, its highest month-end yield since the inception of
the index. India remained the highest-yielding bond market in the index, offering 7.51%, while China Onshore (3.00%) replaced Singapore (3.18%) as the lowest-yielding market.

 

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