Global Strategy Q1 2022

Erste Group Research
Global Strategy | All Assets | Global

January 2022
Global Strategy 1Q 2022

Strongly rising numbers of new COVID-19 infections, higher energy prices, and persistent
bottlenecks in supply chains are dampening the short-term growth outlook. Beyond that
horizon, the economic recovery should continue. The central banks will continue to reduce
their purchase programmes. Interest rates should rise in the USA in 2022 but remain
unchanged in the Eurozone. We continue to prefer investments in equity markets and broadly
diversified investments in high-yield corporate bonds and investment grade hybrid bonds.
Investment Strategy 1Q 2022: Economy

After the substantial economic recovery in 2Q and 3Q 2021, high new
Govt. bond yields Mar. 2022
Germany (10Y)  -0.10 COVID-19 infection rates and a new virus variant dampen the short-term
USA (10Y)  1.60 growth outlook. This situation is complemented by supply-side bottlenecks
that have lasted longer than expected and a drastic increase in energy
Currencies Mar. 2022 prices. In this environment, both private consumption and the willingness to
EURUSD  1.15 invest could suffer temporarily. However, the supply chain bottlenecks
CHF  1.05 should be resolved over time and the situation on the energy markets
should normalise. Therefore, we expect the economic recovery to continue
Equity Performances Mar. 2022
despite these short-term challenges. Inflation has increased more
Global  0%/ +5%
Europe  0%/ +5% significantly than anticipated in the short run but should fall back in the
USA  0%/ +5% medium term due to base effects and the receding pressure from energy
Source: Erste Group Research prices. The medium-term inflation development will hinge on the state of the
job markets and the resulting wage pressure.
Bonds
The ECB has defined a very clear path for monetary policy for the year
2022. The purchasing program PEPP is set to end at the close of March. At
the same time, the purchases made under the APP will be raised from April
and then reduced to EUR 20bn per month over the rest of the year. We
believe that interest rate increases are still far off, as it is not clear at this
point when the ECB will reach its medium-term inflation target of 2%. The
Fed will discontinue its bond purchases already in March rather than, as
originally planned, around the middle of the year. This gives the Fed more
room to manoeuvre, should more rapid interest rate hikes become
necessary. The development on the job market will be crucial to his
question. Both central banks could be confronted with contradictory data in
Prices as of the coming weeks in view of high rates of new infections and challenges to
07.011.2022, 22:00 the supply side. The economic recovery should continue throughout the
year, which is why we expect the ECB and the Fed to stay on course. The
Report Created
10.01.2022, 12:50 yields of 10Y German government bonds and US Treasuries should move
sideways and at best edge moderately higher until the end of the year.
Report published
10.01.2022, 13:00 Currencies
A correction of excessive interest rate expectations in the USA could slightly
Editor weaken the US dollar in 1Q; beyond that, we expect a sideways movement
Fritz Mostböck, CEFA around 1.15. Negative real yields and safe-haven flows should support the
Head of Group Research gold price in 1Q. Due to political risks, the Swiss franc could also continue
to hold steady at relatively strong levels in 1Q.
Equities
Global companies will be faced with declining earnings growth in 2022
Note:
Our estimates are in absolute and not in relative relative to 2021, and the performance of the leading indices of the
terms. Bond yields and equity market returns in developed markets should fall short of last year’s development. We expect
local currencies. Past performance is not a reliable
indicator of future performance. the global equity market to achieve gains of 0 to 5% in 1Q.
Erste Group Research – Global Strategy 1Q 2022 Page 1

January 2022
Contents
Investment Strategy 1Q 2022 ........................................................................ 3
Euro Zone Economic Outlook ..........................................................................4
US Economic Outlook ......................................................................................5
CEE Economic Outlook....................................................................................6
BRIC Economic Outlook ..................................................................................7
Euro Zone ........................................................................................................9
US ..................................................................................................................10
CEE Government Bonds ................................................................................11
EUR-Corporate Bonds ...................................................................................12
Currencies ....................................................................................................13
US-Dollar ........................................................................................................13
Swiss Franc ....................................................................................................14
Gold in USD ...................................................................................................15
Stocks............................................................................................................16
Global .............................................................................................................16
Global Sectors - Positive Outlook ..................................................................18
Global Sectors - Negative Outlook .................................................................22
Europe ............................................................................................................24
USA ................................................................................................................25
CEE ................................................................................................................26
Real Estate Europe ........................................................................................27
Tables & Appendix .......................................................................................30
Economic indicators .......................................................................................30
Forecasts .......................................................................................................31
Equities- Erste Global 1000 Index .................................................................32
CEE Indices ...................................................................................................33
Disclaimer .....................................................................................................35
Global Strategy Team

Investment Strategy Friedrich Mostböck, CEFA, Gudrun Egger, CEFA
Economics
USA Rainer Singer
Eurozone Gerald Walek
CEE Juraj Kotian
BRICs Hans Engel, Stephan Lingnau, Gerald Walek
Currencies
US-Dollar Rainer Singer
Gold Hans Engel
Swiss Franc Gerald Walek
Bonds
US Rainer Singer
Germany Rainer Singer
CEE Juraj Kotian
EUR Corporate Bonds Peter Kaufmann, Elena Statelov
Equities
Global Hans Engel, Stephan Lingnau
Europe Stephan Lingnau
USA Hans Engel
CEE Henning Esskuchen
Real Estate Christoph Schultes
BRICs Hans Engel, Stephan Lingnau
Email: firstname.lastname@erstegroup.com

January 2022
Investment Strategy 1Q 2022
Yields Estimates
current 1Q22 2Q22 3Q22 4Q22
Germany -0.03 -0.10 0.00 0.10 0.20
10y. Govt. bonds

Austria 0.20 0.10 0.20 0.30 0.40
US 1.79 1.60 1.80 1.80 2.00
CEE
Czech Republic 3.18 2.95 2.87 2.80 2.66
Hungary 4.73 4.55 4.50 4.35 4.30
Poland 4.03 3.40 3.30 3.20 3.10
Romania 5.45 5.10 4.90 4.80 4.70
Source: Erste Group Research estimates
Currencies Estimates
current 1Q22 2Q22 3Q22 4Q22
EURUSD 1.13 1.15 1.15 1.15 1.15
Global
CHF 1.04 1.05 1.06 1.07 1.08

Gold (USD) 1,797 1,850 1,870 1,900 1,930
CZK 24.4 24.9 24.7 24.5 24.4
HUF 359 360 355 350 350
CEE
PLN 4.55 4.60 4.58 4.56 4.55

RON 4.94 4.98 5.01 5.05 5.08
Source: Erste Group Research estimates
Equities Estimate
1Q 2022 min max FX
Global *  0% +5% USD
Europe  0% +5% EUR
USA  0% +5% USD
CEE  0% +5% EUR
Emerging Mkts.
BRICs
Brazil  -5% 0% BRL
Russia  -5% 0% RUB
India  0% +5% INR
China  -5% 0% CNY
Technology  0% +5% USD
Consumer Discretionary  0% +5% USD
Financials  0% +5% USD
Health Care  0% +5% USD
Sectors
Industrials  0% +5% USD

Consumer Staples  0% +5% USD
Energy  0% +5% USD
Telecom  -5% 0% USD
Utilities  -5% 0% USD
Basic Resources  -5% 0% USD
Source Market data provider, Erste Group Research estimates

January 2022
Euro Zone Economic Outlook

COVID-19 and energy prices as economic risk factors
After the dynamic economic recovery in 2Q and 3Q, the significant rise in
COVID-19 infection rates across some countries of the Eurozone are
burdening the growth outlook for 4Q 2021 and 1Q 2022. We expect
countries like Spain or Italy, with a relatively high vaccination rate, to come
through the winter with very limited containment measures. For France and
Germany, on the other hand, the risks are slightly more pronounced. Until
the middle of December, mobility data provided by Google (N.B. these have
been the best indicator for the development of private consumption so far)
did not suggest any significant decline in any of the countries.
Energy prices recorded drastic The unprecedented increase in electricity prices constitutes an additional
increase in 2021 risk for the Eurozone growth outlook. The prices of electricity and natural
gas quintupled over the year of 2021, triggered, among other things, by the
drastic rise in China’s demand for natural gas, which threw the global
natural gas market out of balance. The dramatic increase in energy prices
will be burdening private consumption and possibly exert a dampening
effect on the industrial sector’s willingness to invest.
4.4% GDP growth expected for In this context, we expect the growth momentum in the Eurozone to decline
2022 noticeably in 4Q 2021 and 1Q 2022. This fact notwithstanding, we expect
the recovery to continue. We envisage a slight decrease in the momentum
of GDP growth to 4.4% for 2022, followed by another decrease to 2.2% in
2023. Spain and Italy, in particular, will benefit considerably from financial
inflows by the EU recovery fund.
Inflation 2022: 2.9% Given that the forward markets now suggest a drastic average increase in
electricity prices in Europe for 2022, we have revised our inflation forecast
for 2022 upwards to 2.9%. The fact that we also expect wage growth to pick
up speed is another crucial factor for the revision of our forecast. From
today’s perspective, the market envisages sustainable relief on the energy
markets only for 2023.
Output gap should close more quickly Multi-year highs achieved

Eurozone GDP growth vs. output gap German electricity vs. CO2 price
Forecast 350
5.2%
4.4% 300
2.6%
1.9% 2.2% 250
1.3%
0.2% 200
-0.3%
150
-3.0%
100
50
-6.5%
0
2017 2018 2019 2020 2021 E 2022 E 2023 E Aug. 18 Feb. 19 Aug. 19 Feb. 20 Aug. 20 Feb. 21 Aug. 21
Output-Gap Electricity price / MWh in EUR
Sources: Eurostat, Erste Group Research Sources: market data providers, Erste Group Research

January 2022
US Economic Outlook
Coronavirus will weigh on economy
US economy to slow in 1Q We expect the economy to slow significantly in the first quarter of the new
year, with the growth rate being more or less the same as in the third
quarter of 2021. Apart from the high growth rate expected for the fourth
quarter, it is especially the renewed surge in coronavirus cases that will
lower economic expansion in the coming months. Coronavirus infection
rates spiked in the US in December and are currently far above the previous
record of one year ago. There are no signs of stabilization and even less of
a trend reversal. Therefore, a further steep increase in infections seems
likely, even more so considering that full lockdowns are still being ruled out.
Therefore, we expect constraints to economic expansion that will originate
primarily in more cautious consumer behaviour and larger numbers of
persons on sick leave.
Inflation set to decline, but by With the release of inflation data for January, a downtrend in inflation should
how much? set in that will last throughout the entire year 2022. The reason is that the
steep price increases of the preceding year will drop out of the calculations.
This will affect mainly energy prices and vehicle prices (new and used). We
expect to see a slight decline in energy prices over the course of the year,
while vehicle prices should remain stable, because we do not expect the
shortage of semiconductors to become worse. However, insecurity
regarding inflationary developments is high. Massive government financial
aid schemes stimulated the economy during the crisis. At the same time,
there were labour shortages, because a surprisingly large number of
Americans were hesitant about returning to work. The renewed rise of
coronavirus cases is likely to curb demand for labour in the coming months
though, as aggregate demand in the economy is expected to slow. Whether
or not there will be new supply shortages remains to be seen. In any case,
bottlenecks in international ship navigation have eased recently. Since the
bottlenecks caused by the coronavirus crisis should be only temporary, this
would also be true for pressure on prices arising for the same reason. All in
all, we expect contradictory signs from the economy in the coming months.
COVID-19 outbreak implies slower 1Q Inflation expected to decline from start of 2022
Real GDP growth, q/q in % Inflation y/y in %
1.6%
1.5% 8%
7%
1.2% 6%
5%
4%
0.6%
0.6% 3%
2%
1%
0%
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22
Q1 21 Q2 21 Q3 21 Q4 21 e Q1 22 f
Source: Bureau of Economic Analysis, Erste Group Research Source: Bureau of Labor Statistics, Erste Group Research

January 2022
CEE Economic Outlook

Strong economic recovery is well underway and all but two CEE economies
have reached their pre-COVID levels in real GDP. 3Q21 figures confirm the
overall story of activity rejuvenation, albeit with manufacturing hit by supply-
side constraints weighing down on it. Economic growth in 3Q21 was mostly
driven by domestic demand, whereas net exports acted as a drag on growth
everywhere apart from Croatia. Consequently, we revised our CEE8
forecast down to 5.3% in 2021, followed by robust increase of 4.4% in 2022.
Overall, resilient labor markets, together with the gradual release of pent-up
demand remain supportive of further improvements, especially in household
consumption. EU funds together with the large recovery program should aid
investments. Needless to state, risks related to COVID-19 and supply chain
strains remain. We are currently amidst another series of stricter measures
and lockdowns designed to flatten the infection curves across CEE. We
expect these measures to affect mainly services sector and to be lifted at
the earliest possible opportunity. Therefore, the overall impact on growth in
2021 or early 2022 should be mild. Yet, it is not quite ‘full steam ahead’ for
the local economies. Some capacity for brisk growth later remains as the
countries battle issues along the supply chain, as well as high factory gate
and energy costs.
In many CEE countries, inflation has topped the upper limit of the inflation
target and it is expected to remain at an elevated level for some months to
come. More than 90% of the 4pp increase in the headline inflation observed
on average in CEE throughout 2021 was driven by increases of fuel prices,
housing and energy costs, and food prices. We expect both fuel and food
prices to still positively contribute to the headline inflation at the start of
2022, while the base effect in 2H22 should limit the impact of both factors.
As we expect inflation to remain elevated in several large CEE economies
in early 2022, the average inflation rate in CEE8 should rise from 4.5% in
2021 to 6.0% in 2022 before easing more visibly in 2023.

January 2022
BRIC Economic Outlook

China: GDP growth q/q China
10.1%
Growth momentum down in 3Q 2021. Chinese economic growth fell
3.1% 3.2% significantly in 3Q 2021 to 0.2% relative to the previous quarter (1.2%). The
1.3% 1.6% 1.2%
0.2% 0.2% looming bankruptcy of the large real estate group Evergrande has burdened
the sentiment and thus the consumption of the country.
-9.3% Momentum of credit growth falling significantly. The momentum of

credit growth in China has fallen to its lowest level since 2016. This reflects,
3Q 19 4Q 19 1Q 20 2Q 20 3Q 20 4Q 20 1Q 21 2Q 21 3Q 21
Sources: statistics China, Erste Group Research
among other things, the tightened regulatory pressure exerted by the
Chinese government on the real estate and technology sector. The
Growth of exports to Germany vs. China momentum of the growth rate of German exports to China has weakened
credit growth (y/y) recently, as has the credit cycle. China will continue to prioritise the quality
20% 40%
15%
35% over quantity of growth in 2022. Given this context, we expect the real
30%
25% estate sector to remain under pressure. The benefit of the new strategy is
10%
20%
15%
that China’s avoidance of significant bad investments in the real estate
5%
10% sector will reduce the risk of the Chinese financial system being
0%
5%
0%
destabilised. However, at the same time, the velocity of China’s short-term
-5% -5% economic growth decreases. The IMF forecasts GDP growth for China of
-10%
-10% -15% 5.6% in 2022 (2021: 8.0%).
2013 2014 2015 2016 2017 2018 2019 2020
German Exports to China y/y (12 months) China loan growth y/y (12-months) (r.s.)
Sources: PBoC, statistics Germany, Erste Group Research

The Chinese central bank pointed out in December that it would coordinate
the monetary policy for 2022 and 2023 so as to promote the high-quality
development of the economy in line with the goals of the Chinese
government. At the same time, the central bank plans to improve the
transmission of its monetary policy to the economy via structural reforms in
the banking sector in connection with a market-oriented establishment of
the interest rate.
India: GDP y/y % India
The Indian GDP grew by 8.4% in 3Q 2021, relative to a decline of 7.4%

in the previous year. The long-term growth forecast for India remains high.
For 2022, the IMF expects GDP growth of 8.5%, which would make India
again a country with one of the highest growth rates worldwide.
The most recent economic data from India confirm the positive growth
prospects. In December, the purchasing managers’ index of the industrial
sector was at 55.5 points (November: 57.6). The companies reported good
Sources: IMF, Erste Group Research demand conditions and a continued rise in orders. At the same time, the
corporate sector also reported a slight decrease in inflationary pressure in
the procurement of commodities relative to previous months. The most
recent official inflation data confirm these reports. Inflation was at 4.9% in
November, i.e. significantly below the highs around the middle of 2021
(June: 6.3%), and thus remained within the target bandwidth of the central
bank (RBI) of 2 to 6%.
In its December meeting, the RBI left the key-lending rate unchanged
at 4% for the ninth consecutive time. The market consensus expects the
rate to be left at the all-time-low of 4% in 1Q and envisages a slight increase
of 20bps for the middle of 2022. 10Y Indian government bonds were traded
at an unchanged 6.4% yield in 4Q. The Indian rupee remained stable at
about 74.3 to the US dollar in the last quarter.
January 2022
Brazil
Brazil: sentiment of industrial indices
The economic growth prospects have deteriorated for 2022. After the strong
recovery last year with GDP growth of about 4.8%, economic growth is
expected to fall to 0.8% in 2022. The trend of the GDP growth forecasts is
falling as well.
Growth is expected to slow down across all important economic segments.

Industrial production has been forecast to rise by only 0.8% this year. The
purchasing managers’ indices, while still high, have recently started to
Sources: Datastream, Erste Group Research
decline. This applies both to the current situation and expectations of future
development.
Brazil: industrial production and retail
sales (y/y) At currently 12.1%, the unemployment rate is very high. This is not
expected to change much until the end of the year; at that point, a rate of
about 12.0% is envisaged. Private consumption will therefore increase only
marginally in 2022 (i.e. by an expected 0.9% (y/y)). Exports should rise by
2.6% (y/y). A current account deficit of -1.3% of GDP is expected. At about -
6.7% of GDP, the fiscal deficit will remain strongly negative. After an
expected inflation rate of 8.3% in 2021, the rise in consumer prices should
slow down to 5.8% (y/y) in 2022.
The key-lending rate is currently at 9.25%. It was raised seven times last
year. Consensus estimates suggest further hikes this year. A key-lending
rate of 11.45% is expected for the end of the year.
Russia
Russia: GDP growth (y/y) According to consensus estimates, the economy will be growing more
slowly this year than in 2021. GDP growth is expected to decline from an
estimated 4.1% in 2021 to 2.9% in 2022.
Industrial production should grow by 2.6% (y/y). Supply chain challenges

and rising costs of intermediate products continue to burden the situation in
the industrial sector.
The unemployment rate should fall moderately in 2022 relative to the

previous year and is expected to close at 4.4% at the end of the year.
Sources: IMF, Erste Group Research Private consumption benefits from this situation: it is expected to increase to
3.0% (y/y) in 2022. The increase in consumer prices will slow down slightly
Russia: key-lending rates this year. After an expected increase of 6.7% in 2021, it is estimated to rise
by 6.0% (y/y) in 2022.
The current account remains strongly positive. At the moment, it amounts to

about 5.9% of GDP. At 0.6% of GDP, the federal budget is moderately
positive. The key-lending rate is currently 8.5%, and the consensus expects
it to rise to 11.45% by the end of the year. The rouble is expected to
appreciate slightly against the US dollar until the end of 2022.
Sources: Datastream

January 2022
Euro Zone Yield Forecast 1Q 2022

ECB Main Refinancing Rate 0.00 %
German Bund -0.1 % (10-yr.)
ECB to gradually reduce securities purchases
ECB defines clear policy path for The ECB has defined a very clear path for monetary policy for the year
2022 2022. Based on the assumption of a very robust development of the
economy and easing inflationary pressure, net securities purchases are to
be gradually decreased and should return to pre-crisis levels by the fourth
quarter. The purchasing programme PEPP is set to end at the close of
March, but before this, monthly purchasing volumes will be reduced as of
January. We expect EUR 60 billion. As of April, the monthly purchasing
volumes in the other APP purchasing programme will be raised from EUR
20 billion to EUR 40 billion. This amount will be reduced in the third quarter
to EUR 30 billion and to EUR 20 billion in the fourth quarter where it will
remain for some time. At the same time, the reinvestment of principal
redemptions from securities in the PEPP portfolio was prolonged by one
year until the end of 2024. Implementation is to be flexible thereby enabling
the ECB to react to market developments. In this context, the ECB takes
into account the risk arising from selling pressure on certain issuers.
Specifically, Greek government bonds are mentioned that are currently not
being purchased under the APP programme. In our view, we are still far
from an interest rate hike, because the achievement of the ECB’s inflation
target of 2% lastingly is not in sight. Currently, the ECB expects an inflation
rate of 3.2% for 2022, but only 1.8% for 2023 and 2024. Therefore, raising
interest rates now does not make sense.
Bond markets will bide their time
The predictable steep increase of coronavirus cases in the coming weeks
due to the Omicron variant means markets will be faced with contradictory
data. Overall market demand will probably slow down. However, should
Omicron create even stronger constraints on the supply side – that is, more
supply shortages – this could increase price pressure in some areas even
further. Still, it is unlikely that markets will read new trends from this data,
and even more so considering that the ECB is expected to stick to its
course. A sideways movement of the market in the coming months remains
the most likely scenario in our view, however, in a very uncertain
environment.
ECB total assets to grow only gradually Sideways trend on bond markets expected
ECB total assets, in EUR billion Yields on German government bonds by maturity, in %
10,000
0.0
9,000
-0.1
8,000
-0.3
7,000 -0.3
6,000 -0.4
-0.5
5,000 -0.6
-0.6
4,000 2 3 5 7 10
Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22
current Mar. 2022 Jun. 2022
Source: ECB, Erste Group Research Source: Market information systems, Erste Group Research

January 2022
US Yield Forecast 1Q 2022

Federal Funds Rate 0.0 – 0.25 %
US Treasuries 1.6 % (10yr.)
Bond markets remain volatil

Fed preparing itself and the
The US Fed will bring the tapering of its bond purchases forward and thus
markets for interest rate increase
complete the process in March rather than around the middle of the year, as
had been the previous plan. This revision from December was due to
another hefty increase in inflation in November and strong economic data
especially from the labor market. By ending the bond purchases early, the
US central bank wants to give itself the option to raise interest rates sooner.
Interest rate hikes during an active bond purchase regime would be feasible
but would make no sense. This means that under the status quo, rates
could be raised as early as March. The FOMC, i.e. the responsible
committee, regards two out of three conditions as met. The third one, i.e. full
employment, should be met in the course of 2022, according to the
expectations of all meeting participants. The development of the labour
market will therefore be crucial to the question of when the FOMC will raise
interest rates. Two key elements will be employment growth and wage
development. We believe that the new massive outbreak of COVID-19 in
the USA will contain employment growth in the coming months. Wage
growth should also lose some of its momentum, as it had been doing over
the past months when growth rates were falling on a monthly basis. This
supports our opinion that the drastic acceleration of wages in the previous
months was largely due to the re-opening of the economy and thus of a
transitory nature. Therefore, we expect an interest rate increase only for
April.
The bond market has gone down a split path in the past months. Whereas
Yields curve should move lower
short-term bonds reacted to the rising risk of rate hikes this year, longer
maturities remained within a bandwidth until recently, with Omicron risks
affecting this segment. The yields of short and medium-term maturities
could decrease slightly in the months ahead, because, from our point of
view, high interest rate expectations on the markets may not be met. Long
maturities, on the other hand, should continue a volatile sideways
movement. The current yields should mark the upper border of the
bandwidth.
Fed balance sheet total will stop increasing in March Bond markets to remain volatile
Balance sheet total, in USD bn US Treasury yields by maturity, in %
2.0
10,000 1.8
1.8
1.6
9,000 1.6 1.6
1.4 1.48
8,000 1.4
1.2
1.26
7,000
1.0
1.1
6,000 0.8 0.91
0.8
5,000 0.6
0.67
4,000 0.4
2 3 5 7 10
3,000
current Mar. 2022 Jun. 2022
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22
Sources: market data providers, Erste Group Research Sources: market data providers, Erste Group Research

January 2022
CEE Government Bonds Yield Forecast 1Q 2022

Czech Republic 2.95% (10Y)
Hungary 4.55% (10Y)
Poland  3.40% (10Y)
Romania  5.10% (10Y)
In the CEE region, monetary tightening began in June 2021 and continued
at a strong pace throughout 2H21. By the end of 2021, the Czech National
Bank has raised the key rate by a total of 350bp to 3.75%, the Hungarian
central bank by 180bp to 2.4%, the National Bank of Poland by 165bp to
1.75% and the National Bank of Romania by 50bp to 1.75%. The National
Bank of Serbia and the Croatian National Bank remain on hold.
As inflation is expected to remain elevated also this year, monetary

tightening will continue at least until mid-2022. After surprising rate hike by
100bp to 3.75% in December 2021, we expect the Czech National Bank to
deliver another 50bp increase to 4.25% in February 2022, marking the peak
of current tightening cycle. However the uncertainty about the next decision
remains high. In 2H22, the CNB should start cutting rates. The monetary
toolkit of the Hungarian central bank has once again become complex with
one-week deposit rate (currently at 4.0%) being the effective rate. We
expect effective rates to stabilize in the range of 4-4.50% in 1H22, while the
key rate could reach 3.5%. In Poland, the announcement of massive
increases of electricity and gas prices for households as of January 2022
shifted this year’s inflation path further up. Therefore, we expect the
National Bank of Poland to continue tightening and we see the key rate
reaching at least 4.0% by the end of 2022.
LCY curves have shifted visibly upwards and flattened in recent months.
Concerns over surging inflation and subsequent tightening of monetary
conditions, political turbulence, and uncertainty about the acceptance of
local Recovery Plans burdened the markets. We see the current yield and
spread levels across the region as somewhat overdone and expect to see a
correction in the coming months. As far as the CEE FX is concerned, both
global and local factors weighed on regional currencies throughout 4Q21.
This year, positive interest rate differential towards the Euro Area and
improved market sentiment should be positive for CZK, HUF and PLN. On
the other hand, the Romanian leu should continue to gradually weaken, as
long as the twin deficits remain relatively wide. In our baseline scenario, we
expect Croatia to join the Eurozone in 2023.

January 2022
EUR-Corporate Bonds
Investment Grade  
High Yield  
The yields of high-yield bonds have High-yield bonds remain more attractive than investment grade bonds
recently increased to beginning-of-
2021 levels again
The spreading of the Omicron variant unsettled investors in 4Q. Spreads
Average yield in %
3.2% 3.2% widened. This situation notwithstanding, high-yield bonds on average
2.7% outperformed investment grade bonds yet again (-0.2% vs. -0.6%). On
2.5%
2.3%
2.1%
aggregate, only high-yield and investment grade hybrid bonds achieved
1.7% 1.6%
1.8% positive performances in 2021 (high-yield: +3.7%; investment grade hybrid:
+1.3%; investment grade senior: -1.3%).
0.7%
0.5%
0.4% We expect high-yield bonds to outperform investment grade bonds in 2022
IG IG-Hybrid BB HY
as well. Issuers with speculative grade ratings should benefit most from the
12/31/2020 06/30/2021 12/31/2021
continued economic upswing. High-yield issuers that were significantly
Source: market data providers, Erste Group
Research (own calculations)
affected by high energy, commodity, and freight costs as well as supply
As of 31 December 2021 bottlenecks remained optimistic about the imminent future when presenting
their 3Q reports. Demand was strong, and rising costs could be passed on
to customers. Despite already increasing costs at the time, the debt payoff
Investment grade bonds: high spreads period of issuers with BB rating was down in 3Q. BB issuers account for two
in the oil & gas sector despite strong
ratings
thirds of the outstanding high-yield bond volume.
Average spread in bps vs. average rating
140 If government yields rose slightly as expected in 2022, this would yet again
130
Oil & Gas affect the performance of senior investment grade bonds more severely
Average Sector Spread (in bps)
120
than that of high-yield bonds. Investment grade bonds tend to have longer
Automotive Utilities
Telecoms maturities and lower coupons than high-yield bonds. As a result, their prices
110
tend to react to rising government bond yields with more significant losses.
100
If the recovery continues as envisaged, high-yield investors should benefit
90 from a considerable narrowing of spreads.
A1 A3 Baa1
80
Average Sector Rating We generally prefer bonds from cyclical sectors, since this is where we
Source: market data providers, Erste Group
Research (own calculations) expect a further decline in debt payoff period in 2022. In the short run, we
As of 31 December 2021 can see downside risks for the economy and upside risks for prices due to
the rapidly rising number of new COVID-19 infections.
In the investment grade segment, bonds in the oil & gas sector have high
spreads as compared to other sectors despite the drastic increase in oil and
gas prices and the above-average issuer ratings and credit metrics.
Regulatory risks such as the ones stemming from CO2 reduction
specifications seem to keep investors from engaging. In the short run, we
regard the risk/return profile of the sector as good. From a long-term
perspective, the sector leaders are adapting their business models and are
striving for CO2 neutrality. In the investment grade segment, we generally
also prefer subordinated and hybrid bonds due to the shorter average
effective remaining time to maturity.
The expiry of the pandemic emergency purchase programme (PEPP) of the

ECB at the end of March 2022 will have no effect on the corporate bond
market. The corporate bond purchase volume of the PEPP is significantly
below that of the APP, which has been around for longer. The ECB will
double the monthly APP purchase volume from April 2022 to EUR 40bn.
We do not expect any impulses for the spreads from the monetary policy in
1Q 2022. The ECB takes climate risks increasingly into account in its
corporate bond purchases. The spreads of green and ESG-related bonds
are lower and will remain less volatile than those of conventional bonds.

January 2022
Currencies
Forecast 1Q 2022
US-Dollar 1.15
Slight correction of US dollar expected
Expectations of higher interest rates in the US caused the US dollar to firm

over the course of autumn. As of the end of November, a sideways
movement set in at around EUR/USD 1.13. The market is currently pricing
in three US interest rate hikes of 0.25% each for this year. We expect the
US Fed to move at a slower pace. Decisive will be developments on the
labour market. Wage growth is set to slow in our view, because the strong
Interest rate path in US decisive uptrend we have seen since the summer was driven primarily by the
recovery of the economy. Additionally, we expect employment growth
figures to be weak in the first quarter due to the spike in coronavirus
infection rates. Finally, there is an untapped reserve of persons who have
not returned to the US labour market yet, though it is also unclear how
many of them will do so in the end. Generally, this points to a correction of
US interest rate expectations, which indicates a slight weakening of the
dollar. We do not perceive any clear advantage for either of the two
currencies after the correction over the course of the year. Therefore, we
expect a sideways movement, with the risks being skewed towards a firmer
US dollar.
Slight correction follows gains

EURUSD
1.35
Forecast
1.30
1.25
1.20
1.15 1.15 1.15 1.15
1.15
1.10
1.05
Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23
Source: Market information systems, Erste Group Research

January 2022
Forecast 1Q 2022
Swiss Franc 1.05 
Development of the pandemic and inflation strengthening franc
In December, the Swiss National Bank (SNB) kept the interest rate on sight
deposits with the central bank at - 0.75%. The central bank continues to be
willing to intervene in foreign exchange markets if need be in order to
counteract the upward pressure on the franc. On the basis of the
assessment by the SNB, the valuation of the franc remains high. The
conditional inflation forecast was raised slightly to 1.0% for 2022, while for
2022 the SNB envisages a decline to 0.6%. This still puts the central bank
significantly short of our inflation forecast for the Eurozone for the same
periods (2022: 2.9%; 2023: 1.8%).
The franc has appreciated noticeably relative to the euro to just shy of 1.04.
The fast increase in new COVID-19 infections, especially in Germany, has
been one decisive factor of this performance. In addition, the inflation gap
between Switzerland and the Eurozone has widened further to 3.4% on the
back of a new historical high of the Eurozone inflation in November. The
speedy spreading of the Omicron variant in the Eurozone since the end of
December has fuelled worries about the short-term economic development
of the Eurozone. Since we expect the Eurozone inflation to gradually
decline from January 2022, we also envisage a slight depreciation of the
franc against the euro from the beginning of 2022 onwards. However, in the
current environment, the forecast is subject to significant uncertainty.
Political factors constitute risk In addition to the concerns about globally and sustainably elevated inflation
for our forecast rates, political risks represent another risk for our 1Q forecast. France will
be holding presidential elections at the beginning of April. The better
populist candidates such as Marine LePen are currently polling, the bigger
the risk is for a stronger Swiss franc in 1Q. Also, we could see
parliamentary elections shortly in Italy if the current Prime Minister, Mario
Draghi, were to be made Italy’s president in February. Such a scenario
could also exert appreciation pressure on the franc in 1Q, given that
according to the latest polls populist right-wing parties are likely to win the
elections.

January 2022
Forecast 1Q 2022
Gold in USD 1,850
The gold price gained +4.1% (USD terms) in 4Q. Over the year 2021,
Gold priced in USD gold lost -3.6% (in USD).
Demand for gold fell by -7% (y/y) in 3Q, which was to a large extent due to
the decline in investment demand from ETFs. ETF investment demand
bounced back in 4Q though and saw net inflow in November which came
mainly from investors in North America and Europe.
At the same time, due to the recovery of the global economy, demand for
jewellery gold increased significantly (+33% y/y). Bullions and coins were in
higher demand as well (+18% y/y). The global central banks ramped up
their gold reserves (+69 tonnes in 3Q; +400 tonnes in 1Q-3Q 2021). Gold
demand from the technology sector also increased (+9% y/y).
Source: Datastream, Erste Group
Research
Global gold demand and gold price
Demand in tonnes, average gold price per quarter
Sources: World Gold Council, Erste Group Research
The negative real yields, especially in the USA, continue to support the gold
price. Real yields should increase slightly on the back of the expected
moderate yield increase of government bonds and the decline in inflation,
but they should remain in negative terrain. The supportive effect of this
factor will probably become less pronounced over the year.
Outlook: In 1Q, the supporting factors for the gold price should prevail,
albeit only by a minor degree. We expect the price to increase to about USD
1,850. The declining earnings momentum of the global corporate sector and
the more prevalent geopolitical risks as a result of the Ukraine conflict
should support global gold demand. We expect gold demand from ETFs
and physical demand to rise again. The globally rising rate of new COVID-
19 infections could also trigger safe-haven flows and thus an increase in
gold demand in 1Q.

January 2022
Stocks
Forecast 1Q 2022
Global  0% to +5%
Earnings and sales growth (y/y, %) The global equity market index increased by +8.3% (in EUR) in 4Q. The
Sales Net Profit
automotive, technology, utilities, and commodities sectors topped the
USD 22e 23e 22e 23e
North America 7.2 5.6 6.7 8.3 performance list. Both the USA and Europe recorded excellent quarterly
Europe 1.6 2.5 1.1 3.9 results for 3Q. However, the growth momentum of sales and earnings
Asia 1.7 3.2 1.9 5.2 weakened in line with expectations. This trend will have continued in 4Q
EM Asia 9.1 8.1 12.3 12.3 2021 and is also set to continue in 1Q 2022. This scenario notwithstanding,
EM LatAm -2.2 6.2 -16.1 9.3
the consensus expects earnings growth in the high double-digit percentages
EM Europe 5.3 -3.8 6.0 -7.3
World 5.1 4.7 5.2 7.2 for 4Q.
Sources: Erste Group Research Index, FactSet.
The consensus projects global sales growth of +5.1% and global
Global equity sector performance 4Q 2021 earnings growth of +5.2% for 2022. The global operating margin of
Erste Global 1000 Index, EUR
companies is expected to rise to 17.5%. The following chart illustrates the
contribution of the individual regions and sectors to global earnings growth
in 2022. America (especially the USA) plays a crucial role in the expected
earnings growth of developed regions. As for sectors, the significant ones in
the context of contributions are consumer cyclicals, technology, energy,
industrials, and healthcare.
Global earnings growth 2022e: contribution by region and sector, in %

of adjusted earnings, global index
Sources: FactSet, Erste Group Research Index
The global central banks will be buying lower volumes of securities in

2022 than last year, but the additional liquidity will continue to support
the equity markets.
As far as valuations go, the 2022 forward P/E ratio of the global equity
market improved substantially over the year and is now at 18.5x. The
expected dividend yield amounts to an unchanged 1.9%. The valuation
seems fair in view of the forecast of positive sales and earnings growth
among companies. Also, equities are currently attractive relative to
government bonds.
An important factor of the positive performance of equities is the

range of share buyback programmes that companies have launched
since 3Q. This is of particular relevance in the USA. In 3Q, US companies

January 2022
bought back USD 216bn worth of their own shares, i.e. about 0.6% of total
US market capitalisation, which was a new high. Technology companies
and banks are currently running the most significant buyback programmes,
relatively speaking. In Europe, the aggregate buyback value per quarter is
currently EUR 22bn, which falls clearly short of the record EUR 31bn of
2019. However, the trend is increasing here as well.
Emerging markets companies should post sales growth of +6.5% and

earnings growth of +9.0% this year. That being said, this generally
positive aspect is being overshadowed by the significant rise in political risk.
This is true for Russia and China, the biggest emerging market by market
capitalisation. The recent, drastically ramped-up meddling of politics with
the affairs of Chinese companies has caused the valuation of Chinese
equities to drop and to fall now clearly short of the developed markets. This
situation is unlikely to change in the foreseeable future.
Valuation & democracy in selected markets Emerging markets in terms of global equity
P/E ratio, democracy index 2020 market
Erste Emerging Markets index, in % of global index
Sources: EIU, FactSet, Erste Group Research Sources: FactSet, Erste Group Research
The chart highlights the positive correlation between the democracy

index and the P/E valuation. A low democracy value tends to entail a low
P/E. Historically speaking, investors also appreciate legal certainty, which
exists in democratic countries on account of the separation of powers. Also,
the long-term earnings growth of autocratic emerging economies is lower
than that of democratic ones (e.g. India).
In the past two years, the weighting of emerging markets equities in

the global equity index has fallen from above 16% in 2017 to now only
11%. This is, among other things, due to the focus on commodity industries
in countries like Russia and Brazil and the resulting lack of sector
diversification on the equity market.
Outlook: after the substantial growth rates of 2021, the leading indices of
the developed markets should rise moderately in 1Q 2022. We expect the
global equity market index to post a return of 0% to 5% in 1Q.

January 2022
Global Sectors - Positive Outlook

Outlook 1Q  0% to +5% Technology
World Index Weight 25.9%
2021 Perf. EUR 38.4% The technology index gained +14% (in EUR) in 4Q. At +22% (in EUR),
P/E 22e 27.7x hardware clearly outperformed software (+9%). On aggregate, the
Net Profit y/y 22e 8.9% technology index gained +38.4% in 2021 (after +33% in 2020).
Top 3 Companies (Market Cap.)
Apple The outlook for sales and earnings growth is extraordinarily good for 2022
Microsoft and 2023. The projected growth rates are significantly above the expected
Alphabet growth rates of the global equity market (2022e and 2023e: +10%).
Technology index, 1Y After the record year of 2021 with earnings increasing by +37%, earnings
EUR, indexed growth will slow down significantly to +9% in 2022. This is, among other
things, due to the weaker growth of Apple and the earnings decline Intel is
expected to incur in 2022 (USD -6.9bn). The consensus projects a median
of earnings growth for the largest global sector (i.e. technology), which
contains 132 companies, of +13%. More than 90% of companies will
achieve an increase in earnings this year, and the trend of estimates is
positive.
The P/E ratio of the sector edged higher in 4Q to now 27.7x based on 2022
Sources: Erste Research Index, FactSet. estimates. The strong growth and the high profitability of companies justify
this valuation, which is above the global average. We expect the sector
index to post gains of 0% to 5% in 1Q, and we regard both the software and
the hardware sub-segments as attractive.
Outlook 1Q  0% to +5% Industrials

2021 Perf. EUR 23.6% The industrial index gained +7% (in EUR) in 4Q. Companies continue to
P/E 22e 19.1x benefit from the current recovery of the global economy. The orders on
Net Profit y/y 22e 9.2% hand of US companies are historically high, which constitutes a positive
Top 3 Companies (Market Cap.) factor for sales growth in 1Q. The US purchasing managers’ index of the
Honeywell industrial sector was at 58.7 points in December (which is high). The same
Union Pacific index is at 58.0 points in Europe after a string of earlier historical highs.
UPS
Following the record year of 2021, the outlook for sales and earnings in
Industrials index, 1Y 2022 is clearly positive for the biggest US industrial companies (Honeywell,
EUR, indexed Union Pacific und UPS). Boeing should be able to benefit from the rising
demand in the aviation sector. In logistics, the increased freight rates are
expected to hold steady in 2022. The earnings forecasts for Maersk and
Hapag Lloyd were on a clearly rising trend in 4Q 2021.
The consensus expects earnings growth of +9.2% in 2022. The growth

trend was stable in 4Q. At a 2022 forward P/E of 19.1x, the valuation is
slightly above global average. Due to the positive economic outlook, we
expect the sector to maintain its upward trend. The return expected for 1Q
Sources: Erste Research Index, FactSet.
falls within a bandwidth of 0% to 5%.

January 2022
Outlook 1Q  0% to +5% Healthcare

2021 Perf. EUR 27.7% The healthcare sector index increased by +9.6% (in EUR) in 4Q. On
P/E 22e 19.2x aggregate, the sector performed above average, gaining +27.7% in 2021.
Net Profit y/y 22e 6.7%
Top 3 Companies (Market Cap.) The consensus expects sector sales growth of +5.9% in 2022 and a slight
Johnson & Johnson decline to +3.8% in 2023. Earnings are expected to grow by +6.7% in 2022.
UnitedHealth Group The trend of earnings estimates was strongly positive in 4Q. The expected
Roche Holding operating margin improved to now 18.4%.
Health care index, 1Y
EUR, indexed
Among the large groups, the most substantial earnings increases this year
are expected to come from Pfizer (+52%), AstraZeneca (+39%), and Merck
& Co (+25%). The median of earnings growth for the 104 global companies
in the sector amounts to +7.3% for 2022 and +11.5% for 2023. This reflects
the fact that the heavyweights Moderna and Pfizer are expected to incur a
significant decrease in earnings in 2023.
The 2022 forward P/E of the sector is 19.2x, which is exactly in line with the
average of the global equity index. Due to the high profitability and the good
long-term growth opportunities especially in the biotech segment, we expect
Sources: Erste Research Index, FactSet. the good performance to continue in 1Q and forecast a return of 0% to 5%.
Outlook 1Q  0% to +5% Consumer Staples

2021 Perf. EUR 16.1% The sector index increased by +8.8% (in EUR) in 4Q. At +16.1%, this
P/E 22e 20.9x defensive sector showed relative weakness vis-à-vis the global equity
Net Profit y/y 22e 5.9% markets in 2021. The below-average performance resulted from the
Top 3 Companies (Market Cap.) investors’ increased willingness to assume risk on the back of the economic
Walmart upswing. The heavyweight Walmart contributed noticeably to said relative
Nestle weakness in 2021 (+5%), whereas Nestle and Coca-Cola came in above
Coca Cola average at +29% and +24%, respectively.
Global sector index, 1Y The consensus expects sector sales to grow by +4% in 2022. The forecast
EUR, indexed
trend was on a slight increase in 4Q. The 2023 forecast is around the same
level. This year’s earnings growth is estimated at +5.9%, and it is expected
to speed up in 2023 to +8%. Most food producers were able to pass on the
increase in agricultural commodity prices, among other things of sugar and
coffee, to their customers via price increases of their products. We expect
them to continue to do so in 2022, if commodity prices were to rise again. A
constant operating margin of 10% is expected for 2022.
Given the relatively low growth rates, the sector valuation in terms of P/E
Sources: Erste Research Index, FactSet. can be regarded as expensive. The 2022 forward P/E is 20.9x, and the
consensus expects a dividend yield of 2.5% for this year, which is
significantly above that of the global equity market (1.9%). We expect the
sector index to achieve a return of 0% to 5% in 1Q.

January 2022
Outlook 1Q  0% to +5% Energy

2021 Perf. EUR 37.9% The sector index gained +1.3% in EUR in 4Q. At +37.9%, this sector
P/E 22e 8.7x recorded an above-average return relative to other sectors of the global
Net Profit y/y 22e 12.8% index.
Exxon Mobil The ongoing economic recovery has caused a rise in energy demand.
Chevron However, oil production expanded only slowly last quarter. In Europe, lower
Reliance Industries inventory levels of natural gas and the beginning of the heating season
resulted in drastically soaring prices, which were also highly volatile. The
EGR global sector
EUR, indexed, 1Y situation should not change much in the coming months, since the demand
for energy will remain substantial.
The sector should record both sales (revenues) and earnings growth again
this year. The consensus estimates a +4.1% increase for revenues. The
earnings increase of +12.8% expected for 2022 exceeds that of the global
equity market.
The valuation of the companies in the sector is very low. The 2022 forward
Quelle: Erste Group Research, FactSet P/E ratio is 8.7x, and the dividend yield is expected to come to 5.5% in
2022. We expect the sector to achieve a return of 0% to 5% in 1Q.
Outlook 1Q  0% to +5% Financials

2021 Perf. EUR 25.2% The sector index of global financials gained +2.6% (in EUR) in 4Q.
P/E 22e 12.1x Aggregate gains in 2021 were +25.2% (in EUR). In the most recently
Net Profit y/y 22e -0.8% reported quarter (3Q), 86% of the US financial companies reported earnings
Top 3 Companies (Market Cap.) above expectations. The earnings were also +36% higher than in the
referential quarter of the previous year. However, it should be noted that the
Berkshire Hathaway
extremely high earnings growth (y/y) was not the least the result of the
Visa
reversal of accruals for loans that had been set up in the previous year. In
JP Morgan Europe, too, financials largely exceeded the consensus estimates.
EGR global sector The recovery of the global economy continues to support the development
EUR, indexed, 1Y of the sector. However, earnings should edge slightly lower from last year’s
levels. The consensus expects a decline of -0.8% for 2022. In 2023,
earnings should bounce back noticeably again.
The sector commands an attractive valuation by global comparison. The

2022 forward P/E is 12.1x, and at 3.0%, the dividend yield expected for
2022 is very high. We expect the sector index to generate a return in a
range of 0% to 5% in 1Q.
Quelle: Erste Group Research, FactSet

January 2022
Outlook 1Q  0% to +5% Consumer Discretionary

2021 Perf. EUR 16.1% The sector index gained +9% (in EUR) in 4Q. The aggregate performance
P/E 22e 27.3x of 2021 was +16.1%. Despite the significant increase, the sector
Net Profit y/y 22e 21.2% underperformed the global equity market (2021 in EUR: +25.2%).
Amazon.Com The biggest shares by market capitalisation posted sizeable gains. The car
Tesla Motors manufacturer Tesla rose by +41%. This positive share price performance
Alibaba was in later months supported by record delivery levels of Tesla cars. In 4Q
alone, 309,000 cars were delivered. This positive sales trend was backed
by a high sales growth rate of Tesla cars in China. In this market, 13% of all
EGR global sector new cars were purely electric in 2021. Other non-Chinese car
EUR, indexed manufacturers are haemorrhaging market share in China.
Brands like Wuling and BYD, in particular, boosted their market share in
2021. The prospects of high earnings growth are excellent for the biggest
companies in the sector. The automotive sector should also post high
earnings growth rates. Companies in the segments of tourism and leisure,
on the other hand, are faced with a negative outlook due to the recurrent
COVID-19 outbreak.
Sources: Erste Research Index, FactSet.

The companies in this sector will continue to outperform the global equity
market in 2022 in terms of sales and earnings growth. Sales should grow by
+10.4% this year, and earnings by +21.2%. The consensus also expects
significantly higher growth rates for sales and earnings than for the global
equity market in 2023. As a result, the valuation on the basis of the 2022
forward P/E is also above average at 27.3x. The dividend yield projected for
2022 is 0.9%. It is below the global average of 1.9%. This is also due to the
fact that numerous of the largest companies of the sector such as Amazon
simply do not pay dividends and instead reinvest their profits.
We expect the sector to achieve a return of 0% to 5% in 1Q due to its

positive outlook.

January 2022
Global Sectors - Negative Outlook

Telecoms
The sector index bucked the positive trend of the global equity market,
losing -2.5% (in EUR) in 4Q. It was the only sector index with a negative
performance during that period. On aggregate though, the sector gained
+5.5% (in EUR) in 2021. The telecoms sector index thus ended up at the
bottom of the performance list of all global sectors in 2021. The weighting in
the global equity market index fell to a many-year low of 3.7%.
The below-average performance of the sector should continue in 2022.

Sales are expected to increase by only +0.9% (y/y), while earnings are
EGR global sector forecast to stagnate at +0.1% in 2022. The US-based companies Comcast,
EUR, indexed 1Y
Charter Communications, and T-Mobile US are set to achieve the biggest
sales increases this year.
The sector carries a 2022 forward P/E of 14.2x and a 2023 forward P/E of
13.1x. The valuation based on the P/E ratio falls significantly short of that of
the global equity market (global 2022 forward P/E: 18.5x). This is due to the
lacking growth perspectives. The consensus forecasts a dividend yield of
3.3% for 2022. We expect a negative performance of -5% to 0% in 1Q.
Sources: Erste Group Research, FactSet
Outlook 1Q  -5% to 0% Utilities

2021 Perf. EUR 13.7%
The global utilities index increased by +11.6% (in EUR) in 4Q. The full-year
performance of 2021 was +13.7% (in EUR), which means it fell considerably
P/E 22e 20.1x
short of the global equity market (+25.2%).
Net Profit y/y 22e 5.0%
Top 3 Companies (Market Cap.) Sales growth will slow down from +9.4% in 2021 to +2.3% in 2022. Earnings
NextEra Energy growth is also expected to fall, from +9.8% in 2021 to slightly more than half
ENEL of that, i.e. +5%.
Iberdrola
Exelon, NextEra Energy, and Korea Electric Power are expected to post the
EGR global sector highest earnings growth in 2022. The US companies should outperform
EUR, indexed 1Y their European peers because the latter are more severely affected by rising
energy acquisition costs (e.g. natural gas).
The valuation of the sector on the basis of the 2022 forward P/E is 20.1x.
This is above the global average although growth and profitability in the
sector are lower than global average. The consensus projects a dividend
yield of 3.2% for 2022, which is above average. We expect a slightly
negative performance within a range of -5% to 0% in 1Q.
Sources: Erste Group Research, FactSet

January 2022
Outlook 1Q  -5% to 0% Basic Materials

2021 Perf. EUR 13.3% The global basic materials index increased by +9.7% (in EUR) in 4Q. On
P/E 22e 12.3x aggregate, the sector gained +13.3% (in EUR) in 2021. Commodity prices
Net Profit y/y 22e -21.0% were mixed in 4Q. Whereas coal and iron ore prices decreased in 4Q, the
copper price was up. The prices of other precious metals such as silver,
gold, and palladium edged slightly higher, whereas platinum was
Linde
unchanged.
BHP Group
Rio Tinto The consensus expects these companies to incur falling sales of -5% in
2022. Earnings should decline by -21%. The mining companies such as
BHP Group, Vale, and Rio Tinto are projected to incur the biggest decline in
EGR global sector earnings within the sector this year. This sector also provides the biggest
EUR, indexed 1Y
negative contribution to global earnings development in 2022. Companies
that achieve a high margin amid low energy intensity in their sub-sector
have the best chances of rising share prices this year. Linde is a case in
point here (BUY).
No sustainable improvement is expected for next year, either. The

consensus forecasts a decline in sales of -2.1% and in earnings of another -
10%.
Sources: Erste Group Research, FactSet In view of the lack of growth, the valuation of the sector is low. The 2022
forward P/E is 12.3x, while the dividend yield expected for 2022 is very high
at 4%. We expect the sector index to incur a loss of -5% to 0% in 1Q.

January 2022
Forecast 1Q 2022
Europe  0% to +5%
Earnings and sales growth At +8%, the European equity market recorded a strong performance in
EUR, y/y, %
Sales Net Profit
4Q 2021. On aggregate, the index gained +24% in 2021. In particular, the
EUR 22e 23e 22e 23e industrial, technology, and healthcare sectors outperformed the index in 4Q.
France 6.4 1.9 4.1 4.3 Regionally, France – now the by far biggest European equity market –
Germany 3.6 3.5 2.9 3.9 posted above-average gains of +11% in 4Q. The momentum of the equity
Switzerland 8.7 0.7 6.2 4.2 market was fuelled by the 3Q reporting season. Results exceeded
UK 2.2 4.7 3.3 5.2
expectations by some magnitude. 63% of companies reported earnings
Netherlands 9.4 2.3 11.2 5.7
Europe 5.5 2.6 5.1 3.9 above the expected figures. In an average quarter, 52% of companies
Sources: Erste Group Research Index, FactSet. exceed earnings expectations. Total earnings growth was +59%. The
largest growth rates came from financials, commodity companies, and the
Europe index vs. global index healthcare sector. All ten sectors reported positive growth. Sales increased
Indexed at 100, EUR by +15% in 4Q.
The consensus expects earnings growth of +51% and +15% in 4Q 2021

and 1Q 2022, respectively. For the full year of 2021, projected earnings
growth is currently +66%; for 2022, +5.1%. But at +10%, the median of
earnings expectations for the 24 companies in the European index in 2022
is significantly higher than the average. The trend of earnings expectations
for 2022 was slightly positive in 4Q. The expected operating margin
continued to improve, currently amounting to 16.6% on the basis of 2022
estimates.
Sales and earnings estimates Europe
Consensus forecast
Europe sector performance 4Q 2021
Erste Dev. Europe index, EUR
Sources: Refinitiv, Erste Group Research
Due to the low growth momentum, the valuation of the European equity
market was below average by global comparison even before the COVID-
19 pandemic. The 2022 forward P/E is now at 16.1x (and at 15.5x for 2023).
Sources: Erste Group Research index, FactSet. Following the cutting of dividends by many cyclical companies, the dividend
yield projected for 2022 now amounts to 2.8%.
Outlook: due to the good growth prospects and the below-average

valuation by international comparison, we expect European equities to gain
0% to 5% in 1Q 2022.

January 2022
Forecast 1Q 2022
USA  0% to +5%
USA Index The upward trend of the leading US indices continued in 4Q. The S&P
USD 2022e 2023e 500 and the Nasdaq 100 indices reached new all-time highs amid above-
Sales 7.3% 5.7% average gains. The S&P 500 increased by +12.5% (in EUR), while the
EBIT 11.1% 8.6% Nasdaq 100 gained +12.9%.
Net Profit adj. 6.5% 8.4%
The economic environment remains supportive of the corporate sector. The
PE 22.9x 21.1x recently published ISM Manufacturing index was at 58.7 points. Order
Div. Yield 1.3% 1.3% intake in the industrial sector remains very high. The service sector of the
Quelle: Erste Group Research Index, FactSet.
economy is expanding significantly. At 69.1 points, the ISM Services index
has recently reached the highest level since 1997.
USA index vs. global index
Indexed to 100, EUR
3Q sales and earnings increased again. Sales grew by 17.8% in 3Q, which
was substantially above the 5Y average of +5.8%. Earnings increased by
+39.8% in 3Q. 82% of S&P 500 companies reported sales that exceeded
forecasts. In the coming quarters, sales and earnings growth will decline. In
4Q, sales are expected to grow by +12.7%, while earnings should increase
by +21.1%.
The trend of falling growth rates will continue in the first half of 2022. For
2022, the consensus expects sales to rise by +7.3% and adjusted earnings
by +6.5%, which is positive. Equally positive, the consensus estimates of
sales and earnings growth have improved in the recent two months.
Sources: Erste Group Research index, FactSet.
USA: expected sales and earnings by quarter
The 2022 forward P/E amounts to 22.9x, which is above the historical
average and also above the average of global equities. Given the positive
growth prospects and due to the high profitability of companies, the
valuation seems fair.
Outlook
The US corporate sector will continue to experience profitable growth in 1Q
and throughout 2022. We expect the leading US indices to rise on the back
of the positive outlook. According to our models, the index should rise by
0% to 5%.

January 2022
Forecast 1Q 2022
CEE  0% to +5%
CEE coverage index The remarkably durable positive sentiment that we saw for a while
EUR 2022e 2023e ultimately fell victim to the decidedly high sensitivity to pandemic issues. As
Sales 8.1% 1.1% a result, the markets in Central and Eastern Europe reacted to the Omicron
EBIT 8.1% 6.9% variant with a massive increase in volatility and losses.
One feature of this pandemic crisis seems to be the fact that external
PE 11.9x 11.1x effects, such as the swift recovery of the markets, is possible as well if we
Div. Yield 3.2x 3.5x get confirmation that the new virus variant might lead to a milder course of
Source: Erste Group Research Estimates
the infection. However, volatility should generally remain high.
CEE coverage index vs. global index
Indexed at 100, EUR The markets in the region have recovered reasonably well, and Q3 has also
provided good results across the board. It remains to be seen to what
degree new containment measures will affect Q4 2021 and potentially 1Q
2022 growth rates. While attempts are being made to avoid another
lockdown everywhere, the low vaccination rates suggest at least some
measures will be taken.
Regardless of pandemic drivers, we can see growth normalising after the

base effects stemming from quick recovery have increasingly run out of
steam. Although the 12M forward growth rate in the corporate sector is still
Sources: Erste Group Research indices, FactSet
around 20%, the momentum is negative; adjustments, if any, tend to go
towards weaker growth.
The central banks in the region reacted significantly sooner – and forcefully
– to inflationary trends. To date, the regional equity markets have absorbed
this very well, not the least on the back of earnings growth and moderate
valuations, which have compensated for this rising interest rate outlook.
Consumer goods, especially consumer discretionary, currently suggest the

most substantial consensus with regard to the recovery of company
earnings On the basis of valuation, this earnings recovery should urgently
occur. Thus, every new pandemic disturbance to the recovery is particularly
critical for this sector. Banks saw a very good performance, outperforming
all other regional sectors especially on the basis of rising interest rates.
However, this means a large part of the positive outlook should already be
priced in. Utilities could also have peaked, given that electricity prices
should not rise any further.
We maintain our positive stance vis-à-vis the Hungarian and Czech equity
markets and can see further potential for the Polish market. The biggest
political risk for Poland and Hungary remains the withholding of EU funds
due to violations of the rule of law. This would reduce the economic growth
prospects by a noticeable degree. Turkey continues to hold the biggest
political risk. As long as the central bank cannot break free from (assumed)
political instructions, the market’s potential is at best speculative, and
investors have to deal with the risk that any gain might be lost to the
depreciating currency.

January 2022
Forecast 1Q 2022
Real Estate Europe  0% to +5%
The takeover merry-go-round keeps spinning. After the successful offer by
Vonovia to Deutsche Wohnen shareholders over summer, numerous
investors were focusing on the shares of Alstria Office Reit in the fourth
quarter. The Canadian investor Brookfield Asset Management is offering
EUR 19.50 until mid-January, which has sparked a rally in the on office real
estate specialized stock, taking share prices 24% higher. The offer of EUR
19.50 is significantly (i.e. 7%) above the recently reported value of net
tangible assets (EPRA NTA) of EUR 18.26 per share.
CPI, also a real estate group listed in Germany, is for the moment still acting
less aggressively in its attempted takeover of Immofinanz. In its first press
release, it announced that it intended to make an anticipatory mandatory
offer of EUR 21.20 per share. S Immo, the second-largest individual
shareholder, responded to this by making a voluntary partial offer of EUR 23
per share. Since both offers fall clearly short of the recently published value
of net tangible assets of EUR 30.78 per share, further (and higher) bids can
be expected.
The share price of Adler Group, a residential player in Germany, on the

other hand, slumped in the wake of a report by Fraser Perrings Viceroy
Research that accused the company of inflated valuations and transactions
with associated parties. The company is now trying to improve its balance
sheet by selling assets.
The general trends in the real estate sector remained relatively unchanged
in 4Q. The German real estate sector, in particular, is enjoying unbroken
popularity. The yields of the asset classes of residential, office, and logistic
real estate are at historical lows; the asset classes of retail and hotel real
estate – badly affected by the pandemic – have now at least seen stabilizing
top yields after previous increases. Sustainability and ESG are two topics
that have gradually moved up the ranks of investor priorities; as such, they
are likely to affect the future behaviour of investors and thus also real estate
prices substantially.
For 2022, we expect M&A activity to remain elevated. Too many companies
are still traded below their NAV, which is reported in even closer detail on
the basis of the new EPRA standard (EPRA NAV). The future development
of hybrid office models will be relevant for the asset class of office real
estate, while retail and hotels are desperate for the pandemic to come to an
end. Investors will above all be monitoring the yield curve, which is crucial to
the sentiment vis-à-vis the sector.

January 2022
Forecast 1Q 2022
India  0% to +5%
EGR India index The Indian equity market gained +0.8% in EUR terms in 4Q. This means
USD 2022e 2023e that India yet again outperformed the average emerging market (-1.9%). In
Sales 14.6% 10.3% doing so, the Indian market benefited from its broad diversification across
EBIT 20.6% 23.7% multiple sectors.
Sales estimates for 2021 and 2022 (in USD) have been on a continuous
PE 25.8x 22.1x
Div. Yield 1.3% 1.4%
upward trend. For both years, a growth rate of +15% has been projected.
Sources: Erste Group Research indices, FactSet. Earnings are expected to grow by a considerable +25.5% in 2022, with
banks and energy companies set to see particularly strong growth this year.
India index vs. global index
Indexed at 100, EUR
The high net inflows of foreign capital into India have supported the upward
trend since mid-2020. In particular, the equity market has attracted
significant amounts of portfolio influx, among other things due to the positive
earnings development of companies.
At a 2022 forward P/E ratio of 25.8x, the Indian equity market commands a
substantially higher valuation than the average emerging market. This is the
result of the high expected growth rates of sales and earnings in recent
years and the high profitability of companies. Case in point, the average
ROE is 15%. We expect a positive return of Indian equities in 1Q in the
range of 0% to +5%.
Forecast 1Q 2022
EGR China index China | Hong Kong  -5% to 0%
The Chinese equity market bucked the trend of global positive
performances in the last quarter and lost -3.2% in EUR terms. On
aggregate, the market closed the year with a loss of -13%. In 4Q, the
Chinese equity market and its performance remained under the spell of the
ongoing turbulences in the real estate sector and the advancing state
regulation in the technology sector.
Previously successful technology companies such as Alibaba, Baidu, and

China index vs. global index Tencent came under particular pressure in 2021, shedding -44%, -32%, and
Indexed at 100, EUR
-20%, respectively. The shares now command significantly lower valuations
due to the increased political risk.
China’s leading economic indicators such as the purchasing managers’

index of the industrial sector rebounded slightly in December to 50.9 points.
The consensus estimates for sales and operating profit in 2022 was on a
slight decline in 4Q. Sales are currently expected to increase by +8.5% in
2022, while earnings are forecast to grow by +10.7%. The Chinese equity
market has retained a very low valuation by global standards of 8.8x (2022
forward P/E; global: 19.3x).
Due to the volatility in the real estate sector and the resulting risks for banks
as well as the recent decline in sales estimates, we expect to see a
negative performance of -5% to 0% in 1Q on the Chinese equity market
amid high volatility.

January 2022
Forecast 1Q 2022
Brazil  -5% to 0%
EGR Brazil index The Brazilian equity market continued its downward trend in the last
USD 2022e 2023e quarter of 2021, shedding -13.4% in EUR over that period. Mainly
Sales -4.9% 5.0%
companies in the industrial, telecoms, and energy sectors posted gains.
EBIT -15.1% 7.0%
Net Profit adj. -22.0% 6.6%
The growth prospects in the corporate sector are negative for 2022. Sales
PE 9.3x 8.7x are expected to decrease by -4.9% (y/y) this year, while earnings are
Div. Yield 6.3% 6.6% forecast to fall by -22.0%. The trend of sales and earnings forecasts has
Sources: FactSet, Erste Group Research stabilised in recent weeks. That being said, a sustainable improvement of
the tendency of earnings estimates seems unlikely due to the very subdued
Brazil index vs. global index economic growth.
Indexed at 100, EUR
The stock market valuations are low. The 2022 forward P/E ratio is 9.3x,
while the dividend yield based on 2022 estimates is 6.3%. The leading
Brazilian index does not hold any sustainable upward potential due to the
currently negative perspectives of sales and earnings development. We
envisage a slight decline of the equity market in 1Q within a range of -5% to
0%.
Sources: Erste Group Research indices, FactSet Forecast 1Q 2022

Russia  0% to +5%
EGR Russia index
USD 2022e 2023e The Russian equity market, which is dominated by the energy,
Sales 5.3% -3.8%
commodities, and banking sectors, lost -4.3% in 4Q. Banking and
EBIT 4.4% -9.5%
energy shares incurred the most significant losses, whereas numerous
Net Profit adj. 6.0% -7.3%
commodity companies did record positive performances. The shares of the
PE 4.8x 5.2x gold mining company Polyus posted the highest gains (+9.1% in EUR
Div. Yield 10.9% 9.6% terms).
Sources: FactSet, Erste Group Research
Sales and earnings growth will weaken in 2022. For this year, the
consensus expects sales growth of +5.3%. This consensus forecast has
Russia index vs. global index declined in recent weeks. After expected earnings growth of +213% (y/y)
Indexed at 100, EUR last year, earnings growth for 2022 is expected to be much more subdued
at +6%.
The political risk has increased due to the tense situation between Russia
and the USA and Ukraine, as is reflected in the very low valuation of the
equity market. The 2022 forward P/E is 4.8x, while the dividend yield based
on 2022 estimates is 10.9%. The weak earnings momentum and the
political risk do not suggest a recovery of the equity market any time soon.
We expect the leading Russian index to lose -5% to 0%.

January 2022
Tables & Appendix

Economic indicators
Fiscal Gross
GDP Inflation (% Un- CA Balance Balance Debt
(% yoy) yoy) employ. (%) (% GDP) (% GDP) (% GDP)
21e 22e 21e 22e 21e 22e 21e 22e 21e 22e 21e 22e
Eurozone 5.2 4.4 2.6 2.9 8.0 8.1 2.6 2.7 -7.7 -3.4 98.9 96.3
Germany 2.5 4.7 2.9 1.5 3.7 3.6 6.8 6.9 -6.8 -1.8 72.5 69.8
France 7.1 3.5 2.0 1.6 8.1 8.3 -1.7 -1.4 -8.9 -4.7 115.8 113.5
Europe
Spain 5.7 6.4 2.2 1.6 15.4 14.8 0.4 1.4 -8.6 -5.0 120.2 116.4
Italy 6.6 5.5 1.7 1.8 10.3 11.6 3.7 3.6 -10.2 -4.7 154.8 150.4
Austria 4.3 4.6 2.8 3.1 6.3 5.5 -0.8 0.8 -6.7 -2.5 84.3 81.0
UK 6.8 5.0 2.2 2.6 5.0 5.0 -3.4 -3.4 -11.9 -5.6 108.5 107.1
Switzerland 3.7 3.0 0.4 0.6 3.1 0.0 7.2 7.5 -2.1 -0.3 42.7 41.6
Russia 4.7 2.9 5.9 4.8 4.9 4.6 5.7 4.4 -0.6 0.0 17.9 17.9
Poland 5.5 4.6 5.1 7.8 6.0 5.5 -1.1 -0.6 -2.1 -3.3 56.1 55.0
Eastern Europe
Turkey 9.0 3.3 17.0 15.4 12.2 11.0 -2.4 -1.6 -4.9 -5.6 37.8 37.9
Czechia 2.3 3.8 3.8 5.0 3.0 2.8 0.3 1.1 -6.8 -4.1 42.2 43.4
Romania 6.4 4.0 4.9 5.5 5.5 5.4 -6.5 -6.1 -7.8 -6.2 50.2 52.4
Hungary 6.7 4.7 5.1 5.1 4.1 3.8 -2.4 -2.7 -7.4 -5.1 79.4 76.6
Slovakia 3.0 4.2 3.0 5.0 7.0 6.4 -1.1 -0.7 -6.0 -4.0 62.9 61.7
USA 5.7 3.3 4.6 3.3 5.4 3.5 -3.5 -3.5 -10.8 -6.9 133.3 130.7
Canada 5.7 4.9 3.2 2.6 7.7 5.7 0.5 0.2 -7.5 -2.2 109.9 103.9
Americas
Brazil 5.2 1.5 7.7 5.3 13.8 13.1 -0.5 -1.7 -6.2 -7.4 90.6 90.2
Chile 11.0 2.5 4.2 4.4 9.1 7.4 -2.5 -2.2 -7.9 -1.6 34.4 37.3
Mexico 6.2 4.0 5.4 3.8 4.1 3.7 0.0 -0.3 -4.2 -3.5 59.8 60.1
Colombia 7.6 3.8 3.2 3.5 14.5 13.8 -4.4 -4.0 -8.4 -6.4 66.7 67.6
China 8.0 5.6 1.1 1.8 3.8 3.7 1.6 1.5 -7.5 -6.8 68.9 72.1
Japan 2.4 3.2 -0.2 0.5 2.8 2.4 3.5 3.3 -9.0 -3.9 256.9 252.3
India 9.5 8.5 5.6 4.9 na na -1.0 -1.4 -11.3 -9.7 90.6 88.8
Asia
Indonesia 3.2 5.9 1.6 2.8 6.6 6.0 -0.3 -1.0 -6.1 -4.8 41.4 43.3
South Korea 4.3 3.3 2.2 1.6 3.8 3.7 4.5 4.2 -2.9 -2.8 51.3 55.1
Thailand 1.0 4.5 0.9 1.3 1.5 1.0 -0.5 2.1 -6.9 -3.4 58.0 59.5
Australia 3.5 4.1 2.5 2.1 5.2 4.8 3.6 1.3 -8.5 -5.8 62.1 66.4
South Africa 5.0 2.2 4.4 4.5 33.5 34.4 2.9 -0.9 -8.4 -7.0 68.8 72.3
World 5.9 4.9
Source: IMF, EU Commission, Erste Group Research estimates

January 2022
Forecasts1
GDP 2020 2021 2022 2023
Eurozone -6.5 5.2 4.4 2.2
US -3.5 5.7 3.3 2.3
Inflation 2020 2021 2022 2023

Eurozone 0.3 2.6 2.9 1.8
US 1.2 4.6 3.3 2.1
Currency current Mar.22 Jun.22 Sep.22 Dec.22

EURUSD 1.13 1.15 1.15 1.15 1.15
EURCHF 1.04 1.05 1.06 1.07 1.08
Interest rates current Mar.22 Jun.22 Sep.22 Dec.22

ECB MRR 0.00 0.00 0.00 0.00 0.00
3M Euribor -0.58 -0.54 -0.54 -0.54 -0.54
Germany Govt. 10Y -0.03 -0.10 0.00 0.10 0.20
Swap 10Y 0.38 0.20 0.30 0.40 0.50

Fed Funds Target Rate* 0.08 0.13 0.38 0.38 0.38
3M Libor 0.24 0.32 0.40 0.40 0.57
US Govt. 10Y 1.79 1.60 1.80 1.80 2.00
EURUSD 1.13 1.15 1.15 1.15 1.15
*Mid of target range

Austria 10Y 0.19 0.10 0.20 0.30 0.40
Spread AT - DE 0.23 0.20 0.20 0.20 0.20
Source: Market data provider, Erste Group Research
1
By regulations we are obliged to issue the following statement: Forecasts are no reliable
indicators for future performance
January 2022
Equities - Erste Global 1000 Index

Weight Performance (%) Growth (%, y/y)
No. of Mkt. Cap. (%) EUR Sales Net Profit Adj. P/E DY
Erste Global 1000 Index Comp. EUR bn World 1M 3M 12M YTD 22e 23e 22e 23e 22e 23e 22e
World USD 1,019 63,522 100 3.7 8.0 25.2 25.2 5.1 4.7 5.2 7.2 18.1 16.9 1.9
Developed Markets USD 845 56,334 88.7 4.2 9.3 29.2 29.2 4.6 4.3 4.5 6.7 19.9 18.7 1.7
Emerging Markets USD 174 7,188 11.3 -0.5 -1.6 0.8 0.9 7.7 6.5 8.3 9.0 10.7 9.8 3.6
North America USD 467 39,165 61.7 4.8 10.5 34.4 34.4 7.2 5.6 6.7 8.3 22.9 21.1 1.3
Canada USD 34 1,492 2.3 4.5 9.1 34.7 34.7 7.0 3.3 10.0 4.5 23.1 22.1 1.9
USA USD 433 37,674 59.3 4.8 10.6 34.4 34.4 7.3 5.7 6.5 8.4 22.9 21.1 1.3
Europe EUR 231 11,191 17.6 3.5 8.4 23.6 23.6 5.5 2.5 5.0 3.9 16.0 15.4 2.8
Denmark EUR 9 509 0.8 4.2 12.1 30.8 30.8 5.2 -2.3 -1.2 -23.5 18.6 24.3 2.5
France EUR 38 2,377 3.7 2.5 10.5 31.2 31.2 6.4 1.9 4.1 4.3 16.7 16.0 2.5
Developed Markets
Germany EUR 36 1,775 2.8 2.9 6.1 18.1 18.1 3.6 3.5 2.9 3.9 13.3 12.8 3.0
Italy EUR 12 362 0.6 3.9 7.5 14.8 14.8 4.5 0.6 6.8 6.7 14.1 13.2 4.6
Netherlands EUR 17 1,153 1.8 0.1 4.2 18.7 18.7 9.4 2.3 11.2 5.7 19.1 18.1 2.0
Spain EUR 15 472 0.7 2.8 -1.1 5.6 5.6 5.9 3.8 12.7 9.7 15.2 13.9 3.7
Sweden EUR 15 460 0.7 5.5 5.9 26.2 26.2 6.8 4.0 7.0 8.2 18.6 17.2 3.1
Switzerland EUR 27 1,709 2.7 5.5 14.6 28.9 28.9 8.7 0.7 6.2 4.2 18.9 18.1 2.7
United Kingdom EUR 39 1,577 2.5 5.0 8.2 23.6 23.6 2.2 4.7 3.3 5.2 13.2 12.5 3.3
Asia/Pacific USD 147 5,978 9.4 2.0 3.5 10.3 10.3 1.7 3.2 1.9 5.2 14.5 13.8 2.6
Japan USD 87 3,082 4.8 0.9 0.7 7.5 7.5 1.3 2.3 5.6 4.7 14.6 14.0 2.1
Australia USD 22 1,026 1.6 4.6 6.0 16.5 16.5 -4.4 -0.6 -13.0 -6.1 16.1 17.2 4.2
South Korea USD 20 867 1.4 1.5 4.0 -2.3 -2.3 3.4 6.0 3.0 13.9 11.9 10.4 1.6
Taiwan USD 13 845 1.3 3.3 10.5 29.4 29.4 6.3 6.7 5.9 7.7 16.9 15.7 3.0
Emerging Asia/Pacific USD 122 5,403 8.5 -1.3 -1.3 -3.4 -3.4 9.1 8.1 12.3 12.3 11.0 9.8 2.9
China (incl. HK) USD 80 3,693 5.8 -2.5 -2.9 -12.9 -12.9 8.5 8.1 10.7 11.5 8.8 7.9 3.6
India USD 27 1,374 2.2 1.6 1.2 32.2 32.7 14.6 10.3 25.1 16.9 25.8 22.1 1.3
Emerging Markets
Indonesia USD 6 163 0.3 0.3 11.0 8.5 8.5 10.3 7.4 23.8 14.0 15.9 14.0 3.4
Thailand USD 5 99 0.2 3.4 3.0 9.5 9.5 6.3 0.4 11.3 19.2 18.3 15.4 3.0
Emerging Europe USD 13 516 0.8 -1.0 -4.3 34.9 34.9 5.3 -3.7 6.0 -7.3 4.8 5.2 10.9
Russia USD 13 516 0.8 -1.0 -4.3 34.9 34.9 5.3 -3.7 6.0 -7.3 4.8 5.2 10.9
Emerging Americas USD 18 510 0.8 6.5 -7.7 -12.4 -12.4 -2.2 6.2 -16.1 9.3 12.5 11.4 4.5
Brazil USD 13 292 0.5 0.6 -13.4 -26.9 -26.9 -4.9 5.0 -22.0 6.6 9.3 8.7 6.3
Mexico USD 4 158 0.2 13.5 10.6 39.4 39.4 -0.5 5.8 9.9 14.9 17.4 15.1 2.9
Global Sectors
Consumer Discretionary USD 152 9,971 15.7 0.9 7.9 16.1 16.1 10.4 9.1 21.2 18.8 25.5 21.5 0.9
Consumer Staples USD 74 3,954 6.2 7.4 9.0 16.1 16.1 4.0 3.9 5.9 7.8 20.7 19.2 2.5
Energy USD 55 2,711 4.3 1.5 1.3 37.9 37.9 4.1 -0.7 12.8 -7.1 8.6 9.2 5.5
Erste Sectors
Financials USD 175 10,256 16.1 3.7 2.6 25.3 25.2 2.4 5.4 -0.8 8.9 12.1 11.1 3.0
Health Care USD 106 7,120 11.2 6.0 10.0 27.7 27.7 5.9 3.8 6.7 2.9 19.2 18.7 1.6
Industrials USD 141 5,896 9.3 5.3 7.4 23.6 23.6 4.6 3.4 9.2 4.7 18.9 18.0 1.8
Real Estate USD 44 1,348 2.1 7.5 10.7 26.0 26.0 4.0 1.3 7.5 10.1 23.1 21.0 2.8
Technology USD 133 16,421 25.9 2.6 12.9 38.4 38.4 10.0 9.9 8.9 12.3 27.2 24.2 0.7
Telecom USD 43 2,367 3.7 3.8 -2.5 5.5 5.5 0.9 3.2 0.1 7.0 13.8 12.8 3.3
Utility USD 47 1,611 2.5 5.4 11.6 13.7 13.7 2.3 2.1 5.0 9.5 19.9 18.1 3.2
Source: Erste Group Research, FactSet. Closing Prices as of: 31.12.2021.

January 2022
CEE Indices
Weight Performance (%) Growth (%, y/y)
No. of Mkt. Cap. (%) EUR Sales Net Profit Adj. P/E DY
Erste CEE Index Comp. EUR bn CEE 1M 3M 12M YTD 22e 23e 22e 23e 22e 23e 22e
CEE Coverage EUR 157 386 100,0 3,0 2,4 29,3 29,3 8,1 1,1 7,5 7,2 11,9 11,1 3,2
CEE Austria EUR 36 139 36,0 3,7 3,9 34,7 34,7 8,5 2,4 11,8 7,2 11,4 10,7 3,4
CEE Czech Republic EUR 8 41 10,5 9,0 10,7 45,2 45,2 12,0 5,2 24,2 8,4 17,4 16,0 4,5
CEE Croatia EUR 11 6 1,6 2,5 0,4 13,3 13,3 6,2 5,5 16,0 20,4 23,5 19,5 2,6
CEE Hungary EUR 4 24 6,1 -5,1 -9,9 18,3 18,3 7,2 2,3 -6,4 4,3 8,2 7,9 3,2
CEE Poland EUR 78 142 36,9 2,0 2,1 29,8 29,8 9,7 -1,3 4,3 7,6 12,8 11,9 1,7
CEE Romania EUR 9 19 5,0 9,4 3,2 23,3 23,3 14,6 -0,2 44,5 1,2 11,9 11,7 6,5
CEE Serbia EUR 2 1 0,4 1,6 5,1 10,0 10,0 15,1 7,4 69,4 2,2 4,2 4,1 6,7
CEE Slovenia EUR 2 4 1,0 1,3 4,4 29,1 29,1 4,5 4,7 2,6 3,2 11,9 11,5 4,7
CEE Turkey EUR 6 9 2,3 -4,9 -13,5 -23,7 -23,7 -10,5 6,8 -22,8 15,4 6,4 5,6 9,6
Source: Erste Group Research, FactSet. Closing Prices as of: 31.12.2021.

January 2022
Contacts
Group Research
Head of Group Research Fixed Income Institutional Sales
Friedrich Mostböck, CEFA +43 (0)5 0100 11902
Group Securities Markets
CEE Macro/Fixed Income Research Head: Thomas Einramhof +43 (0)50100 84432
Head: Juraj Kotian (Macro/FI) +43 (0)5 0100 17357
Katarzyna Rzentarzewska (Fixed income) +43 (0)5 0100 17356 Institutional Distribution Core
Malgorzata Krzywicka (Fixed income, Poland) +43 (0)5 0100 17338 Head: Jürgen Niemeier +49 (0)30 8105800 5503
Katarina Gumanova +43 (0)5 0100 17336
Institutional Distribution DACH+
Croatia/Serbia Head: Marc Friebertshäuser +49 (0)711 810400 5540
Alen Kovac (Head) +385 72 37 1383 Bernd Bollhof +49 (0)30 8105800 5525
Mate Jelić +385 72 37 1443 Andreas Goll +49 (0)711 810400 5561
Ivana Rogic +385 72 37 2419 Mathias Gindele +49 (0)711 810400 5562
Ulrich Inhofner +43 (0)5 0100 85544
Czech Republic Sven Kienzle +49 (0)711 810400 5541
David Navratil (Head) +420 956 765 439 Rene Klasen +49 (0)30 8105800 5521
Jiri Polansky +420 956 765 192 Christopher Lampe-Traupe +49 (0)30 8105800 5523
Michal Skorepa +420 956 765 172 Karin Rattay +43 (0)5 0100 84118
Michael Schmotz +43 (0)5 0100 85542
Hungary Klaus Vosseler +49 (0)711 810400 5560
Orsolya Nyeste +361 268 4428 Slovakia
János Nagy +361 272 5115 Šarlota Šipulová +421 2 4862 5619
Monika Směliková +421 2 4862 5629
Romania
Ciprian Dascalu (Head) +40 3735 10108 Institutional Distribution CEE & Insti AM CZ
Eugen Sinca +40 3735 10435 Head: Antun Burić +385 (0)7237 2439
Dorina Ilasco +40 3735 10436 Jaromir Malak +43 (0)5 0100 84254
Iulian George Misu +40 758484043
Czech Republic
Slovakia Head: Ondrej Čech +420 2 2499 5577
Maria Valachyova (Head) +421 2 4862 4185 Milan Bartoš +420 2 2499 5562
Matej Hornak +421 902 213 591
Institutional Asset Management Czech Republic
Major Markets & Credit Research Head: Petr Holeček +420 956 765 453
Head: Gudrun Egger, CEFA +43 (0)5 0100 11909 Petra Maděrová +420 956 765 178
Ralf Burchert, CEFA (Sub-Sovereigns & Agencies) +43 (0)5 0100 16314 Martin Peřina +420 956 765 106
Hans Engel (Global Equities) +43 (0)5 0100 19835 David Petráček +420 956 765 809
Margarita Grushanina (Austria, Quant Analyst) +43 (0)5 0100 11957 Blanca Weinerová +420 956 765 317
Peter Kaufmann, CFA (Corporate Bonds) +43 (0)5 0100 11183 Petr Valenta +420 956 765 140
Heiko Langer (Financials & Covered Bonds) +43 (0)5 0100 85509 Croatia
Stephan Lingnau (Global Equities) +43 (0)5 0100 16574 Head: Antun Burić +385 (0)7237 2439
Carmen Riefler-Kowarsch (Financials & Covered Bonds) +43 (0)5 0100 19632 Zvonimir Tukač +385 (0)7237 1787
Rainer Singer (Euro, US) +43 (0)5 0100 17331 Natalija Zujic +385 (0)7237 1638
Bernadett Povazsai-Römhild, CEFA (Corporate Bonds) +43 (0)5 0100 17203 Hungary
Elena Statelov, CIIA (Corporate Bonds) +43 (0)5 0100 19641 Head: Peter Csizmadia +36 1 237 8211
Gerald Walek, CFA (Euro, CHF) +43 (0)5 0100 16360 Gábor Bálint +36 1 237 8205
Ádám Szönyi +36 1 237 8213
CEE Equity Research Romania and Bulgaria
Head: Henning Eßkuchen +43 (0)5 0100 19634 Head: Ruxandra Lungu +40 373516562
Daniel Lion, CIIA (Technology, Ind. Goods&Services) +43 (0)5 0100 17420
Michael Marschallinger, CFA +43 (0)5 0100 17906 Group Institutional Equity Sales
Nora Nagy (Telecom) +43 (0)5 0100 17416 Head: Brigitte Zeitlberger-Schmid +43 (0)50100 83123
Christoph Schultes, MBA, CIIA (Real Estate) +43 (0)5 0100 11523 Werner Fürst +43 (0)50100 83121
Thomas Unger, CFA (Banks, Insurance) +43 (0)5 0100 17344 Josef Kerekes +43 (0)50100 83125
Vladimira Urbankova, MBA (Pharma) +43 (0)5 0100 17343 Cormac Lyden +43 (0)50100 83120
Martina Valenta, MBA +43 (0)5 0100 11913 Czech Republic
Head: Michal Řízek +420 224 995 537
Croatia/Serbia Jiří Fereš +420 224 995 554
Mladen Dodig (Head) +381 11 22 09178 Martin Havlan +420 224 995 551
Anto Augustinovic +385 72 37 2833 Pavel Krabička +420 224 995 411
Magdalena Basic +385 72 37 1407 Poland
Davor Spoljar, CFA +385 72 37 2825 Head: Jacek Jakub Langer +48 22 257 5711
Tomasz Galanciak +48 22 257 5715
Czech Republic Wojciech Wysocki +48 22 257 5714
Petr Bartek (Head) +420 956 765 227 Przemyslaw Nowosad +48 22 257 5712
Jan Safranek +420 956 765 218 Grzegorz Stepien +48 22 257 5713
Croatia
Hungary Damir Eror +385 (0)72 37 2836
József Miró (Head) +361 235 5131 Hungary
András Nagy +361 235 5132 Nandori Levente + 36 1 23 55 141
Tamás Pletser, CFA +361 235 5135 Krisztian Kandik + 36 1 23 55 162
Balasz Zankay + 36 1 23 55 156
Poland Romania
Cezary Bernatek (Head) +48 22 257 5751 Liviu Avram +40 3735 16569
Krzysztof Kawa +48 22 257 5752
Group Fixed Income Securities Markets
Romania Head: Goran Hoblaj +43 (0)50100 84403
Caius Rapanu +40 3735 10441
FISM Flow
Head: Aleksandar Doric +43 (0)5 0100 87487
Group Markets Margit Hraschek +43 (0)5 0100 84117
Christian Kienesberger +43 (0)5 0100 84323
Head of Group Markets Ciprian Mitu +43 (0)5 0100 85612
Oswald Huber +43 (0)5 0100 84901 Bernd Thaler +43 (0)5 0100 84119
Zsuzsanna Toth +36-1-237 8209
Group Markets Retail and Agency Business Poland:
Head: Christian Reiss +43 (0)5 0100 84012 Pawel Kielek +48 22 538 6223
Markets Retail Sales AT Michal Jarmakowicz +43 50100 85611
Head: Markus Kaller +43 (0)5 0100 84239
Group Fixed Income Securities Trading
Group Markets Execution Head: Goran Hoblaj +43 (0)50100 84403
Head: Kurt Gerhold +43 (0)5 0100 84232
Group Equity Trading & Structuring
Retail & Sparkassen Sales Head: Ronald Nemec +43 (0)50100 83011
Head: Uwe Kolar +43 (0)5 0100 83214
Business Support
Corporate Treasury Product Distribution AT Bettina Mahoric +43 (0)50100 86441
Head: Christian Skopek +43 (0)5 0100 84146

January 2022
Disclaimer
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January 2022
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January 2022
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Erste Group Research

Global Strategy | All Assets | Global

Global Strategy 1Q 2022

Investment Strategy 1Q 2022: Economy

Erste Group Research – Global Strategy 1Q 2022 Page 1

Global Strategy Team

Erste Group Research – Global Strategy 1Q 2022 Page 2

Investment Strategy 1Q 2022

10y. Govt. bonds

CHF 1.04 1.05 1.06 1.07 1.08

PLN 4.55 4.60 4.58 4.56 4.55

Industrials  0% +5% USD

Erste Group Research – Global Strategy 1Q 2022 Page 3

Euro Zone Economic Outlook

Output gap should close more quickly Multi-year highs achieved

Erste Group Research – Global Strategy 1Q 2022 Page 4

Erste Group Research – Global Strategy 1Q 2022 Page 5

CEE Economic Outlook

Erste Group Research – Global Strategy 1Q 2022 Page 6

BRIC Economic Outlook

-9.3% Momentum of credit growth falling significantly. The momentum of

Sources: PBoC, statistics Germany, Erste Group Research

India: GDP y/y % India

The Indian GDP grew by 8.4% in 3Q 2021, relative to a decline of 7.4%

Growth is expected to slow down across all important economic segments.

Industrial production should grow by 2.6% (y/y). Supply chain challenges

The unemployment rate should fall moderately in 2022 relative to the

The current account remains strongly positive. At the moment, it amounts to

Erste Group Research – Global Strategy 1Q 2022 Page 8

Euro Zone Yield Forecast 1Q 2022

ECB to gradually reduce securities purchases

Erste Group Research – Global Strategy 1Q 2022 Page 9

US Yield Forecast 1Q 2022

Bond markets remain volatil

Erste Group Research – Global Strategy 1Q 2022 Page 10

CEE Government Bonds Yield Forecast 1Q 2022

As inflation is expected to remain elevated also this year, monetary

Erste Group Research – Global Strategy 1Q 2022 Page 11

The expiry of the pandemic emergency purchase programme (PEPP) of the

Erste Group Research – Global Strategy 1Q 2022 Page 12

Slight correction of US dollar expected

Expectations of higher interest rates in the US caused the US dollar to firm

Slight correction follows gains

Erste Group Research – Global Strategy 1Q 2022 Page 13

Development of the pandemic and inflation strengthening franc

Erste Group Research – Global Strategy 1Q 2022 Page 14

Sources: World Gold Council, Erste Group Research

Erste Group Research – Global Strategy 1Q 2022 Page 15

Global earnings growth 2022e: contribution by region and sector, in %

Sources: Erste Group Research Index, FactSet.

Sources: FactSet, Erste Group Research Index

The global central banks will be buying lower volumes of securities in

An important factor of the positive performance of equities is the

Erste Group Research – Global Strategy 1Q 2022 Page 16

Emerging markets companies should post sales growth of +6.5% and

The chart highlights the positive correlation between the democracy

In the past two years, the weighting of emerging markets equities in

Erste Group Research – Global Strategy 1Q 2022 Page 17

Global Sectors - Positive Outlook

Outlook 1Q  0% to +5% Industrials

The consensus expects earnings growth of +9.2% in 2022. The growth

Erste Group Research – Global Strategy 1Q 2022 Page 18

Outlook 1Q  0% to +5% Healthcare

Outlook 1Q  0% to +5% Consumer Staples