International Report: Q4 2021

The Q4 2021 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 China Sector Report: Q4 2021.

Summary

International equities delivered divergent returns in Q4 as the Omicron variant prompted consternation among investors. Countries that began relaxing travel restrictions towards the end of Q3 now faced a dilemma in handling Omicron. Meanwhile, rising levels of inflation prompted a shift towards tightening among central banks around the world. In the United States, the Federal Reserve reversed its stance that this inflation is transitory. Concerns over inflation had a negative impact on international equities.

The US-based S&P 500 underperformed the MSCI ACWI, with gains of 0.19% for the S&P against 6.68% gains for the ACWI. Emerging markets failed to deliver positive returns as the MSCI Emerging Markets Index declined by 1.31%. None of Global X’s single country or regional funds outperformed the ACWI in Q4.

Source: Bloomberg as of Dec 31, 2021.

Performance commentary is based on the NAVs of the ETFs. Performance shown is past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Returns for periods greater than one year are annualized. For performance data current to the most recent month end, please click on the fund links below.

Performance shown is past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted.

Notable Performers

The Global X MSCI Southeast Asia ETF (ASEA) delivered the highest returns for the international suite in Q4, increasing by 3.72%. Singapore beat expectations with GDP growth of 5.9% in Q4 and 7.2% for all of 2021.1 Q4 began with news of Singapore abandoning the zero-COVID approach and ended with news of the country suspending ticket sales for tourists as a countermeasure against the Omicron variant. Thailand opened up for tourism in November, only to cancel its quarantine-free entry policy after the emergence of Omicron.

Despite a slowdown for Germany’s economic recovery, the Global X DAX Germany ETF (DAX) came in as the international suite’s third-best performer in Q4 with positive returns of 2.17%. As a developed economy, Germany was not subject to the same pressures faced by emerging markets as central banks shifted their policy. Supply chain issues dragged down performance in German manufacturing, and that was particularly true for automakers impacted by the semiconductor shortage. However, DAX is diversified across numerous sectors, with weightings of 19% for Industrials, 16.7% for Materials, 16.4% for Consumer Discretionary, 13.1% for Information Technology as of Dec 31, 2021. This likely helped soften the negative impact of headwinds for manufacturing.

Laggards

The suite’s worst performance in Q4 was the Global X MSCI Argentina ETF (ARGT), which delivered returns of -5.46%. In Q4, Argentina faced rising COVID cases, rising inflation, a heatwave that impacted crop yields, and a stalemate in negotiations with the International Monetary Fund (IMF). As Argentina continues to face difficulties in reaching an agreement with the IMF, negative sentiments towards Argentina’s economic outlook could build and have an adverse impact on the fund.

The Global X MSCI Pakistan ETF (PAK) was the second worst performer with returns of -4.01% in Q4. A shortage of gas cut into textile imports in November as mills were left with no choice but to shut down production. An estimated $250mn in textile exports was lost as a result of the disruptions, which was a headwind for growth in Q4, but it is worth noting that PAK does not have direct exposure to the textile industry as of January 24, 2022.2 Furthermore, Q4 ended with the news of Prime Minister Imran Khan pushing forward with austerity measures for access to an IMF bailout. If spending on infrastructure and raw materials is cut, that could have an adverse impact on certain holdings in PAK.

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