Quarterly International Outlook

Feb 23, 2023

The most recent Global X International Report can be viewed here. The report summarizes market and macroeconomic developments across our International Access suite of ETFs. For a closer look at China Sectors, please see the latest Quarterly China Sector Outlook.

Q4 Summary

International equities generally found some relief in Q4, with the MSCI ACWI Index (MXWD) up 9.76% against a rise of 7.6% for the S&P 500. In Q4, the Federal Reserve (Fed) continued down a path of hawkish rate hikes against a wave of global inflation, with the Fed hiking the federal funds target rate by 50 basis points (bp) to 4.25-4.50% in December 2022. Even as adverse conditions persist into Q1 2023, some signs of moderation emerged towards the end of Q4, such as slowing inflation. Very notably, starting in late November, China defied expectations with the speed at which it opened up and dismantled zero-COVID restrictions, boosting sentiment not only for the Chinese market but also markets that stand to benefit from spillover effects.

Other central banks around the world embarked on rate hikes as pressure from the Fed’s moves set in. By the end of Q4, the European Central Bank (ECB) brought its rate up to 2.50%.1 Amid this backdrop, China remains an outlier as it kept its rate steady at 3.65% throughout Q4, in response to unique headwinds blowing on its economy.

Emerging market equities outperformed those of the US for the quarter but fell slightly behind equities for the whole world, as seen by the MSCI Emerging Markets Index (MXEF) delivering returns of 9.70% against 7.6% for the S&P and 9.76% for the MXWD. Among Global X’s single country and regional funds, six outperformed the MXWD while five underperformed it.

Notable Performers


The Global X MSCI Greece ETF (GREK) was the International Access suite’s best performer in Q4 2022, with returns of 27.57%. On the macro side, Greece surprised to the upside in 2022 even as it grappled with geopolitical headwinds in Europe that had the potential to reduce tourist inflows. Additionally, the big four Greek banks (Piraeus, National Bank of Greece, Eurobank, Alpha) continued progress in reducing their non-performing loan (NPL) rates, boosting confidence in the stability of the Financials sector, which GREK has a 30% allocation to.


The suite’s second best performer in Q4 2022 was the Global X DAX Germany ETF (DAX), which delivered returns of 25.08%. A key question weighing on investors’ minds was Germany’s preparedness for a winter without Russian gas. Although Germany’s relatively high reliance on Russian gas may make it difficult to dodge economic pressures, markets are now pricing in a milder than expected downturn after a strong effort by the German government to prepare for winter. Over the course of Q4, Germany negotiated with alternative suppliers in the Arabian Gulf, set aside 5% of its annual GDP for support measures and stocked up on gas. 2,3 Germany’s success in bolstering its gas reserves mitigated an overall challenging economic outlook, and that likely helped boost sentiment for German equities.


Amid the strong performers in Q4 was Argentina, with the Global X MSCI Argentina ETF (ARGT) returning 19.31% in Q4 2022. A combination of US dollar weakness, China’s reopening, and an upcoming presidential election likely drove this rally, and the exuberance to start 2023. Furthermore, Argentina continued to make some progress in its negotiations with the International Monetary Fund (IMF), notably reaching an agreement to possibly receive $6bn from the IMF’s Extended Fund Facility Arrangement.4



Despite Vietnam posting the highest GDP growth in Asia in 2022 at 8.02%, troubles in Vietnam’s property sector contributed to negative returns for the Global X MSCI Vietnam ETF (VNAM), which was the worst performer in Q4 2022 with losses of 14.32%.5 Liquidity issues, a cash crunch, and government scrutiny all contributed to downward pressure on Vietnamese real estate stocks, which VNAM has a 26.5% allocation towards. As we said in our previous International Outlook, the strong divergence between Vietnam’s macro picture and equity performance could possibly present an enticing opportunity in 2023.

Q1 Outlook: Amid Headwinds, Opportunities Exist

2022 proved to be an exceptionally challenging year for both bonds and equities, and although challenges will carry on into 2023, we see signs pointing towards moderation for some of those challenges. Global growth will likely take a hit in early-2023 with expectations for weaker economic data remaining elevated, however the reopening of China could be a bright spot as Chinese policymakers move much faster than expected in dismantling the zero-COVID policy. Supply chain disruptions will likely take some more time to normalize in 2023, and while a surge of COVID in China could exacerbate that in Q1, we see China’s reopening as conducive to supply chain normalization through the rest of the year. Meanwhile, Russia’s war in Ukraine is dragging on with no clear exit path in Q1, which will likely mean continued geopolitical risks and volatility for energy and food prices.

Inflation in the US showed further signs of cooling down in December with a reading of 6.5%, which resulted in a moderate rate hike of 25bp rather than a 75bp hike at the Feb 1 monetary policy meeting. A reduction of pace in US rate hikes may weaken the dollar in 2023 and mitigate the policy differential that caused many global currencies to tumble in 2022. This could create opportunities for international equities.

 An unexpected development in Q4 2022 with immediate implications for 2023 is the sudden reopening of China, which we believe could have positive spillover effects for international markets, albeit after the economy normalizes from the ongoing COVID surge. A more detailed analysis of China’s domestic situation can be found in our China Sector Outlook.

In our view, a temporary period of supply chain disruptions from the COVID surge will give way to a robust rebound for China in Q2 2023. The elimination of quarantine requirements for inbound travelers, effective Jan 8, will allow consumers and businesspeople shut out of China back into the country, while increased availability of international flights will boost Chinese consumption in foreign markets, with the caveat that some countries are imposing temporary COVID test requirements on Chinese travelers.

Southeast Asia is one of the regions most well-positioned to benefit from the revival of Chinese tourism. The governments of Southeast Asia are aware of that as they are generally choosing to impose little to no restrictions on Chinese tourists, unlike other Asian neighbors like Japan and South Korea. For the past three years, ASEAN (Association of Southeast Asian Nations) economies suffered from a gaping hole in tourism revenues caused by a lack of Chinese tourists, the arrivals of which dropped from 32.28mn in 2019 to a mere 233,500 in 2021.6 As the restoration of Chinese tourist inflows likely improves the macro story in Southeast Asia, we continue to believe that Southeast Asia Financials could do well in 2023 on the back of rising interest rates, though investor excitement over that tailwind could moderate to some extent if the Fed does pivot to rate cuts by the end of the year.

In Europe, geopolitical uncertainty remains a key concern and difficult to predict. While an economic downturn of sorts is likely, we see some signs that any potential recession could be softer as the EU beat expectations in its race to secure gas reserves for the winter. After setting a goal of filling 80% of its gas reserves by November 1, the EU not only hit its goal ahead of schedule but achieved a gas reserve level of 95.5% by mid-November.7 This had the effect of boosting morale among investors in Germany, as evidenced by the ZEW Economic Research Institute’s investor sentiment index turning positive in January for the first time since Russia’s invasion of Ukraine.8 With a Bloomberg survey in January showing markets pricing in a terminal rate of 3.30% for the ECB by May, and then possibly even rate cuts in the following months, a boost for European equities could occur in the latter half of the year.9

In Latin America, Argentine equities have continued to rally, with the MSCI Argentina Index up 15.3% (in USD terms) in the month of January 2023. In particular, we believe markets are looking favorably towards the possibility of new leadership after the October election which could implement government and fiscal reforms to restore the country’s credit profile. With Vice President Cristina Fernández de Kirchner declaring she will not run for any office after her current term expires, new leadership seems increasingly likely. Bearing that in mind, markets could react favorably to any additional indicators that change is approaching, such as election polls.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any stock in particular.

Investing involves risk, including the possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Securities focusing on a single country and narrowly focused investments may be subject to higher volatility. The Global X International Access Suite Funds are non-diversified.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Beginning October 15, 2020, market price returns are based on the official closing price of an ETF share or, if the official closing price isn’t available, the midpoint between the national best bid and national best offer (“NBBO”) as of the time the ETF calculates current NAV per share. Prior to October 15, 2020, market price returns were based on the midpoint between the Bid and Ask price. NAVs are calculated using prices as of 4:00 PM Eastern Time. The returns shown do not represent the returns you would receive if you traded shares at other times. Indices are unmanaged and do not include the effect of fees, expenses or sales charges. One cannot invest directly in an index.

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M1NO5IM consists of the FTSE Norway 30 Index from the inception of the Fund through 7/14/14, and the MSCI Norway IMI 25/50 Index going forward. M1CXGXB reflects performance of the FTSE Colombia 20 Index through 7/14/14, the MSCI All Colombia Capped Index through 8/30/16 and the MSCI All Colombia Select 25/50 Index thereafter. M1CXGXER consists of the FTSE Portugal 20 Index from the inception of the Fund through 12/5/16, and the MSCI All Portugal Plus 25/50 Index going forward. M1CXGXA consists of the FTSE/ATHEX Custom Capped Index from inception through 2/29/16 and the MSCI All Greece Select 25/50 Index thereafter. NU722163 reflects the performance of the Solactive Next Emerging & Frontier Index through 1/15/19, and the MSCI Select Emerging and Frontier Markets Access Index thereafter. M1ANI5R consists of the Solactive Nigeria Index from the inception of the Fund through 8/14/14, and the MSCI All Nigeria Select 25/50 Index going forward.