1. China policy recalibration: Following a sharp decline in the technology sector in January, policymakers in China are reviewing draft legislation titled, ‘Measures for the Administration of Online Games’. The legislation was designed to further restrict engagement and monetisation of online games in China. Policymakers’ willingness to make adjustments based on feedback from investors is positive in our view and signals a more pragmatic approach. 

2.  Interest-rate expectations reset: Investor expectations for the timing of US interest-rate cuts have been pushed back, adjusted following the US Federal Reserve’s (Fed’s) January policy meeting. Investors in December 2023 may have become too optimistic in their assessment on the timing of rate cuts. This reassessment led to a near 3% rally in the US dollar in January,1 which among other factors, has weighed on the performance of emerging market equities. Nevertheless, this is a delay as opposed to a reassessment, and a “no-landing” scenario for the US economy remains the market consensus. It is likely the US dollar will resume its downward trend, which would be supportive of emerging markets—emerging markets tend to perform better in a weak-dollar scenario.

3. Equities in Latin America decline: Inflation was a key theme—while Brazil and Peru saw an improvement, Mexico’s headline inflation continued its upward trend. The share price of Brazil’s national oil and gas company rose on the back of increased output for 2023 and intention to acquire the Jaspe oil block. This will increase its production capacity and in turn, drive growth.

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