Vontobel Holding AG (VONN) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the Investment Outlook 2022. My name is Frank Häusler, and I'm going to present you our macro expectations for the year. You read it in the newspaper, you hear it on TV, the word stagflation. So I'll try to convince you that you should neither be afraid of stagnation nor of too much inflation. If you look at this chart, what you can see here is that the 3 major economic areas are, again, growing above the level as we had seen prior to COVID. And in our baseline scenario, the U.S. and the Eurozone will actually catch up to the long-term trend growth by the end of this year. China is in a different situation. China is delivering below potential and will have to stimulate at one point in time later in the year. If you want to look at numbers, let's look at quarterly growth rates. You see on the left-hand side the average growth rate for the 10 years prior to COVID on a quarterly basis. But you know notice that in almost all regions and in almost all quarters, growth in 2022 will be stronger than on average in the 10 years before COVID. So that's a strong and solid growth environment. We have consumers in a good shape, a lot of savings. We have wage increases. We have companies which can invest. And we have governments which are still supporting through fiscal measures, which then translates, for example, for the U.S. to a 4% annual growth rate. So the overall growth is good. If we here look just at the dynamics, that's not an indicator telling you anything about the level. But what we see is peak growth is behind us and quite decisively in emerging markets. So the economy is slowing but at a very good pace. And that's not a stagnation environment. So let's look at the flip side of the coin. Let's have a closer look at inflation. Our expectations are that inflation will normalize. Yesterday, we got the CPI rating in the U.S. of 7%, very high, and we haven't seen such level in a very long time. But it was expected, so markets didn't really react on that. We expect a normalization throughout the year. It's higher than before. It will stay for most of the year in Europe and in U.S., above the central bank target of 2%. But supply chains eventually will improve and the pressure from higher commodity prices as well. So that's not a stagflation environment. So then how does our baseline scenario look? Forget about rating, the entire slide. Let's focus globally. Baseline, we have solid growth, slowing but at the high level. We have inflation moderating slowly but surely, a bit stickier than expected but not getting out of control. And we have still ample fiscal spending. So it's less stimulus but still a lot of stimulus. If we then switch to the central banks, so the Fed is going to wind down additional purchases. We are seeing 3 to 4 hikes this year. And in the Eurozone, quite differently, the ECB will still expand the balance sheet and not really talking about hikes already. So that means it's less liquidity than we are used. It's less loose, but it's still a very loose monetary policy. So what are then the investment themes for the year? We think part of it, it's going to be harder, and that's especially around China. China faces many challenges, being the very high leverage, being it regulation, which is aiming at more inclusive growth, albeit geopolitical struggles. But that actually means, at one point in time, China will have to stimulate. And that's usually good for emerging markets, probably particularly good for EM high-yield but generally for equity markets. What part will be better, even much better? So one is COVID. We think we'll go from crisis mode to normal mode and to a more normal functioning economy, which will have an impact, of course, on inflation. And these very high inflation levels, they will come back. It will take a bit longer, but inflation is not going to go out of control. And it will be tougher, and it will be the first time where it's opportune actually to discuss debt levels. We had a lot of debt globally prior to COVID, and now we have much more. And if you look a bit closer, you can actually see that the stronger got stronger and the weaker, weaker, relatively speaking, be it on company level or be it on government levels. Look at Norway and Switzerland, still in very good shape, in a very good fiscal position; where Italy and France, the outlook worsened. And then last but not least, it's going to be greener. So we have all the decarbonization targets, be it on company level or on country level, which means a lot of investments. On the other hand, we have the longer, the more investors actually asking for green investments. And we think it's going to be this year where, for the first time, we see really a lift-off on the greener side. So the name of our baseline scenario, therefore, is it's going to be harder, better, tougher and greener. So if we can only take with you 3 main messages from the 6, 7 minutes presentation, there is not going to be stagnation. We have more than enough growth, be it from consumer coming from companies or even investments from governments. There will be no stagflation. Yes, inflation is high as we speak. We think right now is the peak, and it will moderate and normalize from here throughout the year. And in such an environment, that's an environment where there is no alternative to equities, so we stick to our equities overweight. So that was the introduction, our 3 main key takeaways. Now over to [ Jens Korte ] and to New York.

First things first. So first of all, Happy New Year here from New York with the financial district in the background. Well, what a time it is, and it has been. The pandemic has not changed everything. But a couple of tendencies that we saw before, they sort of exploded, and a lot of industries have seen tremendous changes. If you look, for example, as retailers, the hospitality industries and some of those trends are going to change. But who would have guessed a year, 1.5 years ago how quickly the U.S. economy would recover? But that did not just happen by itself. It happened because Washington threw trillions of dollars at the problems. First, Donald Trump then followed by Joe Biden. We shouldn't forget, the United States is not country that lives from exports, but from consumption, so from domestic demand. And clearly, all those billions and trillions of dollars helped Americans to spend and to spend much quicker than hardly any economist would have expected. That spending, on the other side, actually led to this imbalance between supply and demand. And if you have this imbalance, I mean, that could lead to price increases. And that's what we've seen. We also had all those supply chain issues on top of it, and that's why we had to talk about inflation. Some of those tendencies actually might smoothen out a bit. We, for example, just recently heard from General Motors that the chip deliveries are getting a bit better. So from that part of the inflationary flip chart, we could see a pressure ease a little bit. But on -- in other areas, especially when we talk about higher wages, when we see -- talk about the labor market, I do not see that trend to ease anytime soon. We just recently got new figures for the month of November that another more than 4.5 million Americans quit their jobs. And that's a trend we've seen since past April, that almost every month, a good 4 million Americans quit their job. There is a dynamic at the U.S. labor market that we haven't seen in decades, and I believe that those -- this pressure from the labor market is going to stay. Wages will remain high. By the way, I believe it is totally justified that in certain areas, wages are increasing, but for corporations, definitely, that means some higher costs on the other side so far. It's really been quite remarkable how well also Wall Street is dealing with all those challenges. So obviously, I relocated and changed my dress code here into the New York Stock Exchange. What a year it has been for stock markets. The S&P 500 in '21 closed 70 trading days on a new all-time high. There was only 1 year in Wall Street's history that was better in that regard. I believe there was in the 50. So no question, valuations are sky-high. Let me just give you 1 example. Tesla, for example, the company is now worth more than -- or at least at some point, than $1 trillion. To put that in comparison, General Motors had a market cap of a good $80 billion. So Tesla is more than 10x more worth on Wall Street than General Motors. If that is justified, well, I personally have some doubts. Let me give you another example. Apple, for example, with a market cap of a good $3 trillion. I mean none -- no company has achieved that ever here in the United States. Clearly, Apple is a very successful company, but a valuation of $3 trillion is also pretty heavy. What was driving the stock market partly was FOMO and TINA. So there is no alternative. There is the fear of missing out. And if those trends are going to continue in '22 remains to be seen. What I hear quite often is that probably you need to be much more selective in '22 than you had to be in '21. One trend that is [Audio Gap] agree that also reminds me is a little bit on the dot-com era. Back then, everything that had a dot-com at the end was on [ Vogue ] and on Wall Street. And now you have [Audio Gap] I have the feeling at least everything somehow related to EVs, so electric mobility is pretty hot. And in certain cases, that is definitely not justified at least. That's what I do believe. And what is also interesting and that's also true not just on Wall Street but also in -- for the energy market in the United States, just because there are more investments, let's say, into solar, for example, or wind, that does not mean that fossil fuels are yesterday's news. We've seen it with oil prices increasing quite a bit in the past couple of months, and that was definitely also beneficial to the big oil companies. So the United States is doing a bit of a different approach than some European nations where there clearly is the tendency to get rid of fossil fuels here in the United States. The government and also the industry does both. So there might be a bit of a different approach here. One other interesting trend to follow is what's going to happen with China. I mean once there is the tendency here on Wall Street -- or actually, from regulators to maybe delist the Chinese companies, that is a real threat and one reason why those stocks got under heavy pressure. But then also, I mean, there are all those regulatory uncertainties when it comes to Beijing. And they actually could also pull some of the Chinese companies from Wall Street. One thing is clear: if you're after global investors' money, you still do that in general through Wall Street and not through Hong Kong or Shanghai. So there is a certain risk involved. And then also, I mean, I'm not a Chinese expert or a China expert, but what I have heard quite often is that there have been some infrastructure programs in China that nobody really needed, but well, it kept the economy going. So we will see if the Chinese government will have a different approach regarding that in the next couple of months and years, and that actually could theoretically put some pressure on the growth rates in China. So I hope to see you soon back in person. Other than that, stay healthy, good luck, and all the best here from New York.

Thank you very much to New York. Thanks, [ Jens Korte ] for your outlook. 2022 was very interesting, indeed. Ladies and gentlemen, dear viewers, a very warm welcome also from my side. I'm pleased to join you throughout Vontobel's Investment Outlook 2022. Let me remind you right at the beginning of this event that your questions are welcome. You can enter them via the chat function. And the very end of these live streams, we would be very, very happy to get also a feedback from you. We start with the talk, and I would like to welcome my renowned guess, Frank Häusler. You met him already right at the beginning, and he introduced to us the 4 topics we are talking about today. Frank is the Chief Investment Strategist and, therefore, responsible for the entire Vontobel investment strategy. Welcome, Frank. And hello, Peter, Peter Romanzina. He is the Head of the Swiss Equity Research Team, and this analyst team covers around 100 Swiss stocks.

Peter, I would like to stay at Switzerland for a short moment because the Swiss stock market did not really start great into the new year. And there is a saying, as goes January, so goes the year. And this, to be honest, does not sound too good for me. What's your response to this?

Well, thanks for the question. And first of all, January is not over yet. So let's see what the entire January will bring. But anyway, we still have the view, and this is also in accordance with the view of Frank Häusler's team that ultimately, there is no 2 ways around equities. So we are still in an environment of TINA, there is no alternative to equities; and FOMO, fear of missing out. And therefore, we still believe, over the whole year 2022, equities will do rather well, a bit more difficult than last year, but still well.

You published a paper about pricing power. And pricing power, I'm sure you know that is a sign that shows what extent is a supplier able to enforce its prices at the markets vis-a-vis customers and the competitors along the whole supply chain. And I read in your paper that pricing power is a very important element in your Swiss equity research. Can you tell us how you assess pricing power of a company?

When we look at pricing power and when we talk about pricing power, we talk about it at the holistic level because you cannot only take one or the other factor. You have to look at it in its entirety, and that makes it rather complex. I'll give you an example from the pharma industry. Pricing power is normally seen in the pharma industry as quite good, but there are huge differences. So in the U.S., the market is quite liberal, and you have a lot of pricing power. In Japan, it's totally government-driven, and you have no pricing power. And Europe is somewhere in the middle. So it really depends where are you selling your products. Furthermore, or a second element is that pricing power is there as long as you have a patent. When patents expire, then pricing power is gone because everybody can copy your products. So you also have to look, is this patent life of a given company still valid for a long time? Or is the entire sales sort of the patent protection coming to an end in due course? So you really have to talk to the company and analyze in-depth to come to a significant conclusion.

So is it possible to answer the question, which sectors are stronger at the moment; which are weaker?

I think in general, there are sort of proxies for that. Yes. But you have to be very careful in drawing conclusions from a sort of top-down perspective. You still have to look at the details because the devil is in the detail. Yes, industries where you have a lot of R&D, i.e., research and development, normally have more protection against price erosion or have a better pricing power.

Last question to that topic, what does pricing power do for inflation protection?

It just allows you when you have -- I mean, companies are now more confronted with rising input prices. And what you want to do as a company to protect your margins is offset this input price increase with price increases of your own products. And if you can't do that, you have to absorb them in your margins, and that means your margins are going down, which is normally not good for your profitability and for your share price.

Thank you for the moment, Peter. Frank, coming back to you, we heard you talking about inflation, stagflation, recession and so on. And I mean, you sounded very optimistic, but these are uncertain times. So what could go wrong in a bigger perspective that you would have to correct your optimistic view?

There are many triggers we could actually push us away from our baseline scenario regarding inflation. I think one of them and an obvious one, that's a geopolitical conflict in the Middle East, which would have a big impact on the oil price and, therefore, on all energy commodities. And energy sometimes is up to 15% of CPI. On the other hand, we can think about COVID restrictions. Should there be an additional wave, a new mutation? And we sit at home again for a couple of months and supply chains are falling apart again? And then you have completely desynchronized demand and supply pattern? That would have a big impact on inflation. But as said, that's not our main assumption, but these are triggers to watch.

From an investor's perspective, in concrete terms, how can investors cushion inflation in their portfolios?

Yes. That would depend a lot on the level of inflation. If you just do a bit of analysis, statistics, you can see that up to 5%, 6% inflation can be digested from equity market. If you just look at the last 40, 50 years. In such a regime, it was usually good for equity. It's not so good for bonds. If you then go to more extreme scenarios like 6% to 15% inflation, again, not our scenario, then first, it's time of commodities, but then it's time of gold. And then really gold protects your investments from inflation.

So it's never bad to have gold in the portfolio.

No. If you look at this year, for example. We think real rates are going to rise, and gold doesn't yield anything. You are not getting a dividend. You are not getting a coupon. And in such an environment, just tactically speaking, it's not such an attractive asset. But when you think in the context of a portfolio, it's a balancer, and it protects against inflation.

Thank you for the moment. Peter, how does that look in the Swiss universe?

I mean in the Swiss universe, what you look at is, again, companies who can protect themselves from inflation by exerting their pricing power. And there's a lot of elements to that. You can take brand. A very strong brand normally can increase prices during inflationary times. Therefore, not absorbed, as I tried to explain beforehand, not absorb sort of the higher input prices by their margins. You can have things, industry concentration is one, where you have a lot of power within a given industry. Or you can also look at companies that have very high value-add, very high gross margins. There, you will also see that these companies normally have more pricing power. And therefore, within the context of Swiss equities, that's where you want to go.

Thank you very much for the moment. Dear viewers, if you would like to know more about inflation, stagflation and so on, Frank's team wrote a very interesting paper about all those topics, and you find it online or you can discuss it with your relationship managers of Vontobel. And we go to a new topic, and this would be the heritage of the COVID crisis regarding the debt. And the debt mountains were already very high before the pandemic around the globe. And right now, they are increasing, let me say it like this, really insane, to be honest. And I mean, we could say inflation helps a little bit with this mountain of debt, but still one day, they need to be paid back. How, Frank?

Yes. I think you rightly said, if you look at debt and the inflation, and we have a certain level of inflation, it's going to be a bit melting like snow in the sun, but that's probably not going to be enough. And just looking at the debt level is only looking at half the picture. We think you have to first look at debt per GDP. And there, of course, rather policies possible. If you invest in growth, so you have more debt, but you're actually capable of growing faster than your debt growth. Your debt to GDP is going to slow and even getting lower over time. That's one policy. And the other thing is, especially in Europe, given the debt levels, it's hardly possible to imagine that interest rates are going to go up. So the burden of this debt at this time it's not so high because you have very low interest rate payments, and that's going to stay for quite some time.

So it's going to be the next generations who have to take care about that. Maybe, I don't know, but we will see. Thank you. I mean Switzerland, Peter, is in a much better position in comparison, but still, by the end of 2022, the Federal Council expects a shortfall in the extraordinary budget of around CHF 25 billion. And according to the debt break we have, this step must be repaid. What do you think? How and when will the federal government manage this? Will we feel that already in 2022 somehow?

I doubt that. I really believe, at the end of the day, we need growth currently, and we don't want to put the brakes on this growth. Neither the central bank nor the government want to do that. And then, over time, if you look at sort of our historic budgets and budget surpluses, contrary to many other countries, we have a -- we had in the past years, an average debt budget surplus. We will manage to offset that over time. And don't forget, Frank said, there will be a little bit of inflation. So from a debt-to-GDP perspective, the debt will also start to reduce a little bit. But it will take time, but we'll manage quite well.

Thank you. We move on to the next topic. We move to China. Beside I say, we can't move to China. This is the problem. China is a closed country since the beginning of the pandemic. It's hard to enter it. You have weeks of quarantine, and it's impossible to travel inside China. Frank, how do you deal with this situation?

So when we look from the outside world, I think you always see the problems. I mentioned before that China has very high debt levels. So if you look at combined debt, government, corporate and household debt, that's north of 350%. So it's probably the most indebted emerging market globally. So the policy before COVID of China was deleveraging, but they cannot pursue it for now. So that's 1one problem. The other one is regulation, and they want to generate more inclusive growth, which is done through regulation, which leads to volatility in markets. And then, of course, last but not least, there might be a lot of geopolitical tension. But despite all that, China's share of global GDP is going to rise for the next 5 to 10 years, even when they slow down to 4% or 3.5% sometime in the future. And the main reason is the only economy, which is bigger, the U.S., is growing even slower. So despite all the problems, China will become even more important, economically speaking and, therefore, on the investment front as well.

You mentioned a stimulus program of China. Did I understand you correct, in the second half of the year or at the end of this year, who would profit?

Yes. We think, just given current growth pattern and given that for the average Chinese, every year should be a little bit better given the targets of the Communist Party, China will have to stimulate to reach that goal sometime -- I don't want to be too precise, but sometime in 2022. And that will have a quite big impact on the investment side. I think an obvious one is high yield in Asia, which suffered a lot due to the Chinese properties, developers we heard in the media. But it's generally good for emerging market equities or all of equities. It's stimulus, and it's additional stimulus, which is not yet factored in.

Thank you. Let's go on to the next topic, which is the green economy. And this topic was pushed behind a little bit by the COVID crisis, but this will change, for sure, or is changing already. Societies, economies, states want or need to become greener. How do you see this in your sector? And what does that mean for your strategy?

I think, first, we heard from many governments that they set themselves a goal for carbon neutrality, be it 20, 40, 50 or 60. But if you do the math for China, the Eurozone, U.K. and the U.S., you realize that they will need at least USD 18 trillion of investment. So it's a lot of investments. So there will be sectors and country profiting, and others will be on the losing side. It will be, at one point in time, probably not this year, but that will be inflationary. There is so much additional investments, a; and b, you have to transition from a very efficient technology to maybe initially a slightly less efficient technology, which then will improve, and it will become deflationary again. So that's the government side. The other side is us, investors. I think the younger debt generation, the higher the interest in E, environment; or ESG, environment, social and governance, topics. So that's then the demand side. So I think you have this push and you have this high-affinitive people that's going to be a mega trend, which will stay with us for quite some time.

You mentioned countries who will be winners or losers. Who?

I think the interesting thing is here, we get very often the question -- the statement that ESG is something for developed markets.

Yes. We have to explain, mate, yes.

Yes. E as in environment, the climate; social components; and governance components. But it's actually more important for emerging markets. It's in their interest, especially on the climate side. And if you just do analysis, say, if you take into consideration ESG factors in emerging markets, they matter even more for performance of investments.

Let's go to Switzerland. Again, how do you assess this in your department, the Swiss sector, the green economy? Is this a rising topic?

It's definitely a rising topic. And if you talk to clients and investors, it has been rising at sort of a faster pace every year. So from that perspective, highly important, highly material. So we went out about 2 years ago and started a project on ESG on the whole sort of topic, but that includes, obviously, the E. And we developed our own methodology. And instead of just sending out questionnaires or reading sustainability reports, because we talk to company management literally every day of our work, we started talking to the company. We want to know what they do, not what they write.

So you go and see them directly, and you talk. What are the questions you were asking them?

We have a methodology where we have 15 topics and behind the topics, these 15 topics are more than 400 questions. And we cannot say we ask them all to every company. We ask what is material. So for example, you don't want to ask a software company about their water consumption. It's irrelevant because that's not what -- but if you have a cement producer, you want to ask them about their energy consumption, for example, in the E. So it needs to be material. And yes, we go to these management and we talk to this management, but we also talk to a lot of the sustainability managers of these companies because what you write and what you do does not always need to be the same thing sort of topic of greenwashing, which is sort of a bit everywhere in every space. There is at least a fear of it. And therefore, we think we need to dig deeper and because we have to convince the companies we can do that.

Yes. You mentioned, greenwashing. And there is always a risk because the pressure on becoming green is really very, very high. So do you think with the discussions, going to the companies, staying in touch with them, you can avoid this?

Look, you can never entirely avoid this. And this is one of the very difficult things in the whole environmental discussion as well. How do you measure? It's so complex. It's so new. We need a taxonomy, and we need how to measure it consistently because everybody will look at it a little bit differently. Everybody will sort of talk around it somewhat differently. And there is no reporting standard as of yet. And that's what governments and other stakeholders are working on, and we will get there over time, and it will certainly improve.

How active does an investor to be, to be sure to invest in green economy?

I think you can invest in a whole array of ways. You can invest in impact investing. We have talked a lot about this, Frank, as well. And on the other side, when you talk about when you want to see a specific company, then you have to do a lot of work on this to really make sure that this is really what you want to be. But impact investing is probably a good topic for you.

Yes. I think it's a very relevant one because it's a bit about how do you go about the whole topic of ESG. And we think, first, it's something for an active manager. You don't buy the index. You have to actually distinguish between the good and the bad ones. It's what you mentioned before, generally, in research, you have to go very deep. You have really to go there and look at it in detail. And then you can do 2 things. You can buy the ESG darlings. They're just the companies which are very good today. Or you can think a bit more about where can I have a big impact. So you can look for the average, really, a bad company but with very credible and solid strategies of how to improve in a very measurable way. So there are various ways of attacking it, but it's something for active managers and not for passive managers.

Thank you for the moment. Let's go to your questions, dear viewers. I start with, faced with financial fallout and rising government debt as a result of the pandemic, should we expect wealth redistribution and new corporate taxes? Who would like to answer this?

I think we both have a lot to say to that topic, probably. I think regarding redistribution, that's very often around government programs and if the government wants to spend money. And there, I just see 2 ways of spending money. One is what we have done during the pandemic, and that made a lot of sense. That's just saving companies from default and saving workers from unemployment. And that's not very targeted. It's usually very, very broad. So that's initially the absolute right thing to do. Afterwards, investment programs must be different, and they must target productivity growth. That can be through infrastructure programs or that can be even through educational programs. But it just takes much, much longer to arrive, and that will actually then help the entire society. And that's maybe on that front. Maybe you want to add, Peter?

What we see and it's in itself very dramatic and unfortunate, the winners are becoming stronger, and the losers are becoming weaker also on that front. If you look in an inclusive economy, you have to try and include all economic participants, i.e., all your workers, if you want. And in emerging markets, you take India, a lot of people have lost their jobs, a lot of people don't go -- a lot of kids don't go to school anymore, and it will be harder for these economies to come back. While in Switzerland, this is certainly something which will not have such a dramatic impact. But I'm totally with Frank. Now we have to become more targeted, more inclusive and more investment-led. Now it was about spending. The next step is about investing.

Interesting. There's 1 question could match very well to what you said. Is investing in emerging markets equities a sensible move?

I would definitely hand this over to Frank who is more the specialist there of emerging markets than I am.

Thank you very much. Yes. I think as often, you can take a strategic perspective or a tactical one. If you take a strategic one and your horizon is 5 to 10 years, you cannot avoid emerging markets. It's higher growth, it's higher return expectations on these very long horizons. It's new consumer class. It's growing strongly. If I think more tactically, there will be a time this year to overweight emerging markets, and that will have to do with 2 things. I think one is, as I mentioned before, it's Chinese stimulus. So if there will be stimulus, it will be very good for emerging market. The other one is around the U.S. dollar. Usually, if the U.S. dollar weakens, that's a tailwind for emerging markets. And very often in the past, can be different this time, before the first Fed rate hikes, the U.S. dollar was strong. And after the Fed rate hikes, the U.S. dollar started to weaken a bit. And this will be true triggers to watch regarding going overweight EM equities.

Frank, there is another question for you. Your economic growth outlook shows emerging markets growing at a lower rate compared to developed markets. In contrast to the interest rate hikes in the U.S., could this mean that growth supporting monetary policy measures can be expected in this region?

I think they have more room given higher real rates, given a higher rate environment. And as mentioned before, China will have to do something. So yes, we can expect more there. And there is generally going to be a slightly desynchronized central bank policy. Even in developed markets, you have a Fed who will net tighten, and you have ECB, which is still net loosening.

You mentioned TINA, there is no alternative, in the context of equity markets. Regarding investors that want to take less risk, where do you still see attractive alternatives to the classic equity market?

I mean if interest rates will go up over time, then obviously, certain elements of -- or certain pockets of the bond markets will become a bit more attractive. That was certainly not the case in the beginning of the market where we see -- have still seen bond markets falling. And if I look at Frank's forecast, there is still a little bit more to go in terms of interest rate increases. So from that perspective, that will, over time, become a bit more attractive. And then you have pockets in high yield in emerging market that, as Frank already mentioned, there are certain alternatives. But really, the big alternative is not yet there in our opinion.

Another question. Supply chain issues may improve. But what about rising wage and rent, which is 30% of U.S. CPI? The Fed has been wrong for a year. What makes you think they will be right over the coming year? Aren't they drastically behind the curve? What justifies continuing to buy billions of bonds still through March?

Yes. I think if you want to judge the Fed, whether they are -- were behind the curve or not, future will tell. I think they changed their monetary policy goal when they moved to a symmetric 2% target and not below and at 2%, tolerating an overshoot. I think given the state, we were on the unemployment front, growth, et cetera. They did the absolutely rational thing initially. And as we can see in the media right now and by the communication from the Fed, they are aware of that. They will move faster. They move faster than we expected 3 months ago. And as you could just see in the recent minutes and statements, they are actually even talking about quantitative tightening for the first time, which would mean a reduction of the balance sheet. So that might well happen.

Another question. The situation is the same for Chinese-listed companies and Hong Kong-listed ones or NYSE treats different them?

I think that specific equity question, I'd like to hand it over to you, Peter.

Not my specialty, Hong Kong and China, but I would think so that there is a big similarity.

So what do you expect for U.S. dollar-euro exchange rate for 2022?

Yes. I mean I mentioned it before a bit that usually after a Fed rate hike, the U.S. dollar is rather weakening. We have a counterforce right now, and that's a decelerating economy. Usually, the euro is strong as a cyclical currency when the economy gets better. What we just recently saw is there were some exaggeration be it the Swiss franc, be it the U.S. dollar, and what we now saw was just a near-term correction, more sustainable levels, let's call it this way.

And last question for today, and I'm sure the question we could not answer yet, you would be happy to take care about them after our live stream. So the last, emerging markets have been emerging since the mid-1980s. Considering the exchange rate depreciation, has a study been done, which compares equity earnings between emerging markets and U.S.A. or Switzerland in U.S. dollars or Swiss franc terms?

There was no specific study, of course, to tackling exactly that question. But maybe giving a bit the broader context, that for me ties into the direction that very often people think emerging markets are still what they were 20 or 25 years ago. But they are not, be it on the government side, be it policy side or be it just the indices, which became very well diversified, global investment indices or take inflation, 20, 25 years back, 15%-plus inflation. And over the last 10 years, emerging market inflation has been pretty stable, surprisingly stable. So these markets have come a very long way. So then historically comparing earnings is something very tricky to do if you want to adjust for all these changes, which have been taking place over the last years.

Thank you, Frank; thank you, Peter, for your answers. And thank you very much, dear viewers, for your questions. Thanks very much for joining us. As I mentioned at the beginning, we would be very happy to get also your feedback on the whole stream event. We wish you now a very good and happy 2022 also from an investor's perspective, and most important, stay healthy. Goodbye, and [Foreign Language].