We have the final 4Q21 reading of our AlphaWise Global MNC China Sentiment Index based on 1,259 qualified data points collected from 450 multinational companies' earnings transcripts. Key findings include: 1) MNCs' final sentiment reading for 4Q21 was 37, up eight points vs. 3Q21 (Exhibit 1): The notable rebound was somewhat surprising amid a resurgence of Covid in China and ramifications from geopolitical uncertainties. The score is on par with the 4Q20 reading. The percentage of MNCs feeling positive rose 6ppt vs. 3Q21 to 65%, a minor drop versus 69% in the interim reading (Exhibit 2).

2) MNCs' sentiment in most sectors and all regions showed major improvement: Materials, Consumer Discretionary, Energy, IT and Consumer Staples showed the most QoQ improvement vs. 3Q21. Sentiment scores for all regions rose vs. 3Q21, led by US MNCs.

3) The largest QoQ sentiment improvement was recorded in Consumer/Consumption and Cost since the index was launched in 1Q18: The score for Macro/Economy theme was largely flat vs. 3Q.

The rebound in Global MNCs' sentiment on China in 4Q21 may not be sustained: China's economy is facing a double whammy from: 1) imported inflation from elevated commodity prices and potentially weaker external demand as a result of the Russia/Ukraine conflict; and 2) a worsening Omicron spread in mainland China and HK coupled with China sticking to Covid-zero, at least in the near term, which could weigh on services consumption and (to a lesser extent) manufacturing activities.