Blog Posts — March 23, 2022

The effects of the Russia-Ukraine crisis on equity markets in charts – Part 2: Developed vs. Emerging Markets

by Diana R. Baechle, PhD

Top 10 Takeaways Year-to-Date*:

  1. Developed Markets (DM) have underperformed Emerging Markets (EM), while DM’s total risk remains above that of EM.
  2. After dipping to a 16-year low in February, the ratio of EM to DM risk is nearing 1.
  3. DM’s Market Risk was above that of EM until recently, but all other risk components have been higher for EM so far.
  4. The US and Canada’s contributions to STOXX® Global 1800 risk both declined.
  5. China and India’s contributions to STOXX® Emerging Markets 1500 risk both rose.
  6. All countries in the STOXX® Global 1800 Index have posted YTD losses, except Canada, Singapore and Norway.
  7. Major Latin American nations are among the few to see YTD gains among EM countries.
  8. Positive country contributions were too small to offset negative contributions from countries with much bigger weights in each index.
  9. Energy is the best performer YTD in the STOXX® Global 1800 Index.
  10. All sectors in the STOXX® Emerging 1500 Index fell following Russia’s invasion of Ukraine.

*Analysis as of March 16, 2022 prior to Russian securities’ expulsion from STOXX indices on March 18, 2022.

In case you missed it, our earlier blog post analyzed the effects of the Russia-Ukraine crisis on European markets.


1. Developed Markets (DM) have underperformed Emerging Markets (EM), while DM’s total risk remains above that of EM

Source: Qontigo
  • Despite the recent rebound of the STOXX® Global 1800 and STOXX® Emerging Markets 1500 indices, they are both still recording YTD losses, of -9% and -8%, respectively.
  • Short-horizon risk shot up for both Developed and Emerging Markets this year, particularly after Russia’s invasion of Ukraine.
  • After starting the year near parity, Developed Markets’ risk remained above that of Emerging Markets, as measured by Axioma’s fundamental short-horizon Worldwide and Emerging Markets risk models, respectively.
  • This pattern is unusual, as Emerging Markets have been on average 20% riskier than Developed Markets over the past 16 years.

2. After dipping to a 16-year low in February, the ratio of EM to DM risk is nearing 1

Source: Qontigo

The gap between Emerging Markets risk and Developed Market risk has been shrinking after Russia’s invasion, as Emerging Markets saw a more accelerated increase in risk.


3. DM’s Market Risk has remained above that of EM until recently, but all other risk components have been higher for EM YTD

Source: Qontigo
  • Market Risk is the driver of the total risk increase for both Emerging and Developed Markets this year.
  • After Market Risk, EM Country Risk and Currency Risk saw the largest jumps in risk.
  • Specific and Industry Risk, which represent a smaller part of total benchmark risk, were relatively flat for both DM and EM.

4. The US and Canada’s contributions to STOXX® Global 1800 risk both declined

Source: Qontigo
  • At 66% weight in the STOXX® Global 1800 Index, the US contributes the most to benchmark risk. However, its contribution declined from nearly 71% at the beginning of the year to 69%.
  • Canada was the only other major country in the index to see its contribution to risk decline.
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5. China and India’s contributions to STOXX® Emerging Markets 1500 risk both rose

Source: Qontigo
  • Taiwan and South Korea saw their contributions to benchmark risk decline, while those of India and China rose.
  • Despite the decline in Russia’s weight in the index from 4% at the beginning of the year to 2% in mid-March, its risk contribution rose from 4% to 5%.

6. All countries in the STOXX® Global 1800 Index have posted YTD losses, except Canada, Singapore and Norway

Source: Qontigo
  • All countries in the STOXX® Global 1800 Index posted YTD losses, except Canada, Singapore and Norway.
  • Net exporters of oil and gas, such as Norway and Denmark, recorded gains after Russia’s invasion.
  • Austria, Ireland and Italy, which rely heavily on Russian oil and gas, were among the most negatively affected after February 22.
  • Hong Kong’s recent losses were driven by the surge in coronavirus cases, which led to a new wave of lockdowns in Hong Kong and mainland China.

7. Major Latin American countries are among the few EM countries to see YTD gains

  • Brazil, Chile and Colombia were the top performing countries in the STOXX® Emerging Markets 1500 Index year to date.
  • Not surprisingly, Russia was the biggest loser with a YTD loss of nearly 50%.
  • Few emerging countries saw gains after February 22.

8. Positive country contributions were too small to offset the negative contributions of countries with much bigger weights in each index

Source: Qontigo

9. Energy is the best performer YTD in the STOXX® Global 1800 Index

Source: Qontigo
  • Energy, Utilities, Health Care and Real Estate sectors in the STOXX Global 1800 Index saw gains following Russia’s invasion.
  • Global Energy is by far the best performer in 2022, with a YTD gain exceeding 20%.
  • However, Energy has a small weight in the global index and has the only positive contribution to the index’s YTD return, not being able to offset those of all other sectors in the index.
  • Info Tech, Consumer Discretionary and Consumer Services had the largest negative contributions to the global index’s YTD return.


10. All sectors in the STOXX® Emerging 1500 Index fell following Russia’s invasion of Ukraine

Source: Qontigo
  • With a year-to-date return larger than -15%, Energy has been the worst performer among all sectors in the STOXX Emerging Markets 1500 Index so far in 2022.
  • The drop in Russian energy stocks was responsible for the overall negative contribution of the Energy sector to the Emerging index’s year-to-date return.
  • The loss recorded by Russian energy stocks offset positive contributions from Brazilian, Thai and Indonesian Energy stocks.
  • Given its large weight in the index, Info Tech contributed nearly 50% to the index’s YTD loss of -8%.


For questions or comments about this data, please contact the Qontigo Applied Research team.


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