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S&P Latin America Equity Indices Quantitative Analysis Q4 2022

S&P Kensho New Economies Commentary: Q4 2022

iBoxx Tadawul SAR Government Sukuk Indices – Q4 2022

iBoxx ALBI Monthly Commentary: December 2022

iBoxx SGD Monthly Commentary: December 2022

S&P Latin America Equity Indices Quantitative Analysis Q4 2022

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Michael Orzano

Senior Director, Global Equity Indices

S&P Dow Jones Indices

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Silvia Kitchener

Director, Global Equity Indices, Latin America

S&P Dow Jones Indices

S&P Latin America Equity Indices Commentary: Q4 2022

Despite a difficult year for most global equity markets, the S&P Latin America BMI gained 4.9% in 2022, and it was the only major regional equity market to close the year in positive territory. This marked a stark reversal from 2021, when Latin American equities were the sole region in the red, while the S&P 500® and several other regional equity markets hit record highs.

While most equity markets were hampered by rising interest rates, recession concerns and a steep decline in Information Technology and other growth-oriented stocks, Latin American equities benefited from high exposure to commodities and limited exposure to Information Technology, along with currency strength versus the U.S. dollar.

On a quarterly basis, global regions struggled throughout the year. Latin America, on the other hand, was up three of the four quarters, as shown by the performance of the S&P Latin America BMI.

A closer look at the main country indices shows that Argentina’s S&P MERVAL (ARS) posted the largest gains for Q4 (45.3%) and YTD (142.0%). However, these returns are reflective of the country’s high inflation rate. Focusing on the emerging markets in the region, Chile was the top performer in 2022, as reflected by the S&P IPSA, driven mainly by its exposure to mining, which kept it in positive territory in Q2 (while other regions posted losses in that period). Peru and Colombia, despite recent political instability with newer elected governments, ended the year losing a mere 2% each. The largest markets in the region, Brazil and Mexico, both had their ups and downs; in the end, Brazil was able to generate higher returns, driven by its mining and oil & gas companies, helping the S&P Brazil LargeMidCap Index (BRL) gain 3.5%, while Mexico’s S&P/BMV IRT (MXN) was down 5.7% for the year.

Sector analysis shows that the one-year returns were mixed. The rise in oil prices drove the Energy sector (41.2%) to outperform. Other top performers among the S&P Latin America BMI sectors were Real Estate (16.3%) and Utilities (14.5%), however Financials (8.8%) and Materials (9.1%), which are represented by the largest companies in the region, had the greatest contribution to returns after Energy.

2023 started with new visions and expectations for the region. New leadership in Brazil, Chile, Colombia and Peru will likely bring significant shifts in economic and governmental policies in 2023. The region is also preparing for what may be a difficult year, as echoes of a global recession weigh on equity market sentiment. Will Latin America continue to outperform? It will be interesting to see how the region navigates through economic, political, and public health care uncertainties.


S&P Kensho New Economies Commentary: Q4 2022

The S&P Kensho New Economy Indices seek to track the industries and innovation of the Fourth Industrial Revolution

The last quarter of 2022 saw U.S. equities rebound from their YTD lows as inflation prints started to cool.  While the Fed has not relented on its hawkish stance, despite multiple forward-looking indicators pointing to a recession ahead, wages have provided a sturdy support to consumer spending on goods and services.  Additionally, the uncertainty at the start of the Q4 over the U.S. mid-term elections also dissipated.  Notwithstanding its weakest annual return (-18%) since 2008, the S&P 500® posted its first positive (7.6%) quarterly return of 2022.  Market strength was broad based, with 10 of the GICS® sectors contributing positively to the overall S&P 500 quarterly performance.  From a style perspective, value continued its outperformance versus growth in Q4, ending 2022 with the largest outperformance in nearly two decades.  Most S&P 500 Factor Indices posted positive quarterly performance, from defensive-tilted low volatility and quality factors, along with more cyclical high beta and growth factors.  Within the S&P Kensho New Economies, 15 of the 25 subsectors had positive quarterly returns, the most since Q2 2021.  Given the sanguine performance of U.S. factors, positive exposure to volatility and growth factors was not as detrimental during this quarter as it was in the prior three quarters.

In contrast to the equity and bond markets’ weakness, U.S. Dollar strength has extended into Q3 2022, becoming the longest USD strengthening cycle in its history. The knock-on effects of a stronger dollar have exacerbated the drawdowns (in USD terms) among emerging market equities and have likely influenced their central banks’ fiscal policies. Overall, the macro environment (core rates, oil and inflation, among others) appears to be dictating the markets’ near-term risk appetite. The impact on global energy prices from the ongoing Russia-Ukraine conflict remains in focus, as energy-related themes posted another strong quarterly performance.

Top Three from across the New Economies

Space (18.5%): KMARS, which is primarily composed of Aerospace & Defense sub-industry firms (nearly 58% of the index), posted its best quarterly performance since Q4 2020.  The rally was broad, with 29 of the 34 constituents contributing positively to the index performance.  Maxar was the top performer (176%), largely owing to a positive reaction to news that Advent International would be taking the company private after a buyout involving a significant premium (link).  Boeing was another notable performer this quarter (57%), becoming one of the top three best-performing stocks within the S&P 500.  Continued recovery in the air travel industry and robust delivery numbers helped turn the sentiment around Boeing, as it recovered from a four-year low at the beginning of the quarter.  Virgin Galactic topped the underperformers list (-26%), extending its downtrend for the sixth consecutive quarter and reaching a historic low.  The company’s plans for space travel have been delayed, adding to the cash burn, and reporting a Q3 2022 revenue of less than USD 1 million.  After a flurry of SPAC activity in the Space arena, 2022 was a year of consolidation and competition that hopefully will drive the next leg of innovation in this area.  The index’s heavy weight toward defense firms also reflects rising national security interests forming a key support for this industry.

Robotics (16.4%): KBOTS had its best quarterly performance in two years, aided by positive performance from 27 of its 35 constituents.  Its fourth quarter recovery was strong after ending the previous quarter near a two-year low.  Oceaneering Intl., the only stock in the index from the Energy sector (best-performing sector within S&P 500 in 4 2022), was the top contributor after gaining 120% in the final quarter, of which 57% was in the last two weeks of October near the Q3 earnings release (link).  The company, in addition to its deep-sea drilling activities, is also involved in defense contracts supporting the U.S. Navy.  The biggest index underperformer was Omnicell, a pharmacy inventory management company, which suffered after reporting weak Q3 numbers that have slowed down from their COVID-era forecasts.  The index recouped the previous quarter’s loss this quarter but ended the year down (-22%).  With a balanced exposure to defensive Health Care Equipment and the more cyclical Industrial Machinery and Life Sciences Tools & Services, the index was less volatile this quarter than most of the other Kensho subsectors.


iBoxx Tadawul SAR Government Sukuk Indices – Q4 2022

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Paulina Lichwa-Garcia

Associate Director, Fixed Income Indices

S&P Dow Jones Indices

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Florian Guth

Associate Director, Fixed Income Indices

S&P Dow Jones Indices

iBoxx Tadawul SAR Government Sukuk Index

The iBoxx Tadawul SAR Government Sukuk Index total return level declined over the course of 2022, in line with other bond markets, which all were under pressure throughout the year.  The index touched its low point at the end of October, falling under 99 for two days.  Toward the end of the year, the levels recovered, but annual yields have stayed elevated even at the end of 2022, as countries’ interest rates rose, following increases by the U.S. Federal Reserve.  Meanwhile, index duration plunged (see Exhibit 4), with subdued new debt issuance.

Exhibit 1: Total Return of the iBoxx Tadawul SAR Government Sukuk Index

Exhibit 2: Total Return by Maturity

Exhibit 3: Key Analytics of the iBoxx Tadawul SAR Government Sukuk Index

Exhibit 4: Key Analytics of the iBoxx Tadawul SAR Government Sukuk Index

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iBoxx ALBI Monthly Commentary: December 2022

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Kangwei Yang

Director, Fixed Income Indices

S&P Dow Jones Indices

December 2022 Commentary

iBoxx ALBI Monthly Commentary: Exhibit 1

2022 started off with (somewhat) bullish market expectations, but soon after, rising inflation, interest rate hikes and recessionary fears took over, which made it a year to forget for both fixed income and equities.  The S&P 500® lost 19.44% in 2022, recording its worst year since 2008.  U.S. Treasuries—as represented by the iBoxx $ Treasuries—also lost ground, falling 12.94% in 2022.

The People’s Bank of China (PBOC) loosened its monetary policy in 2022, in contrast to central banks from other developed markets.  Despite woes in the Real Estate sector, Chinese Government Bonds and Policy Bank bonds performed well in 2022—as represented by the iBoxx ALBI China Onshore—returning 3.30% (in local currency terms).  Investors were also keeping a keen eye on how the recent pivot in China’s COVID-19 strategy would play out and how it would affect regional and global markets in 2023.

In the broader Asian fixed income markets, the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD) returned 2.90% in December 2022 but ended the full year down -7.39%.  In 2022, one-half of the eligible markets recorded positive returns in local currency terms.  Gains were led by Indonesia (up 3.63%), China Onshore (up 3.30%) and India (up 2.46%).  Among the bottom performers were South Korea (-8.97%), Hong Kong (-8.51%) and Singapore (-6.37%).

Apart from China Onshore (-2.55%) and Indonesia (-1.87%), short-dated bonds (1-3 years) significantly outperformed long-dated ones (10+ years) in 2022.  The difference in performance between short-and long-dated bonds was greatest in South Korea and Hong Kong, recording gaps of 18.38% and 18.95%, respectively (see Exhibit 11). Compared to last year, yields across iBoxx ALBI eligible markets rose across the board (except for China Onshore).  Hong Kong saw its yield surge 282 bps to 4.80% as of Dec. 31, 2022, while the Philippines, South Korea and Singapore recorded increases of more than 100 bps.  Combined with changes in the other markets, the overall index yield increased by 85 bps to 4.15%.

iBoxx ALBI Monthly Commentary: Exhibit 2


iBoxx SGD Monthly Commentary: December 2022

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Jessica Tan

Principal, Fixed Income Indices

S&P Dow Jones Indices

December 2022 Performance

Faced with record-high inflation, the Russia-Ukraine conflict, supply chain disruptions and interest rate hikes, 2022 was a turbulent year for the global financial markets.  With China relaxing COVID-19 restrictions and the Bank of Japan adjusting its longstanding yield curve control measures, 2022 continued to deliver surprises even in the last month of the year.

Singapore’s GDP growth halved from 7.6% in 2021 to 3.8% in 2022, which exceeded the government forecast of 3.5%. GDP growth weakened in the fourth quarter of the year, as the reported estimates came in at 2.2%, almost one-half the 4.2% growth for Q3.  The Monetary Authority of Singapore (MAS) Core Inflation level remained unchanged in November, at 5.1%, due to the easing in services and utilities inflation, which was offset by larger increases in the cost of food, as well as retail and other goods.

With inflation remaining at elevated levels and signs pointing to an economic slowdown, markets cooled off in December after a relief rally in November.  The Dow Jones Singapore Index ended the year with a 2.45% loss for the month and a 14.95% loss for 2022.

The iBoxx SGD Overall gained 1.21% this month, supported by a 1.65% gain from Singapore Government Securities (SGS) and a modest 0.39% gain from the non-sovereigns.  Year-to-date, the index returned -5.92%.

iBoxx SGD Monthly Commentary: Exhibit 1

iBoxx SGD Monthly Commentary: Exhibit 2


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