1. South Korean automotive manufacturer signalled that it expected the global automotive chip shortage to ease by the second quarter of 2022. The spread of the Covid-19 Omicron variant has impacted the supply of automotive semiconductors, particularly from Southeast Asia, where Malaysia is the dominant supplier accounting for 10% of basic semiconductors used in cars, smartphones and home devices. An easing of the supply shortages would be positive for the South Korean market as reflected in consensus expectations of 11% earnings growth in 2023. We are positive on the outlook for the South Korean market, in particular the technology sector.

2. Higher commodity prices and stronger domestic currencies drove returns in Latin America. Undemanding valuations coupled with growth in Brazil’s economic activity index after four consecutive months of decline, and expectations that inflation may have peaked drove equity prices in Brazil. In Chile, investors welcomed president Gabriel Boric’s new cabinet that reinforced his moderated stance and promoted economic stability. Similarly, market confidence in Peru was driven by indications that president Pedro Castillo was taking a more moderate approach than widely expected. However, Mexican equities declined on peso weakness and disappointing gross domestic product data, which indicated that the economy entered a technical recession in the final quarter of 2021.

3. Europe, Middle East and Africa region rose in January. Markets in the Middle East gained on the back of higher oil prices. The South African market gained on higher metal prices and a stronger rand. Sentiment was further driven by the end of the country’s fourth COVID-19 wave and relaxation of mobility measures. In Hungary, strength in the financials sector drove market returns. Russia was among the worst.

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