Ruminations from our City columnist
Now to read the words of the wise, this year was the year of the developed markets, and in fact the emerging markets found themselves being hit by the rush to safety after Ben Bernanke’s vaguest of threats on May 22nd that the markets’ stimulant of choice, namely the provision of cheap money from QE, might be reduced.
However, of course once you get past the headlines, the reality reveals some interesting anomalies.
With the exceptions of the Japanese index of the electronic trading market JASDAQ and the US NASDAQ, this list of top ten indices doesn’t reflect an especially admirable set of economies as far as their performance is concerned. So it is wise to go behind the headlines to see that not all the emerging and struggling economies had such bad markets. To counter this we should also recall that the Brazilian Bovespa index has fallen by over 27% made worse by the falling Real.
The industry has now come up with another annoying confusing acronym in the form of the ‘TIPs’. No, not the much loved US Treasury Inflation Protected Securities, but rather a linking together of three ASEAN nations: Thailand, Indonesia and The Philippines.
All three nations were impacted by the 22 May speech from Ben Bernanke which sent a shiver through many emerging markets as fears of tapering first began to haunt markets. This suddenly deflated the euphoria for emerging markets and at last ensured that pompous western investment managers stopped seeing all emerging markets as one asset class. All three had recently seen their markets hit record highs: all three saw their stock markets indices cascade into bear traps, taking their currencies down with them as well, although the Indonesian Rupiah seemed to take an even heavier fall than the rest.
However, again, we should not fall into the concept that a cheap acronym intrinsically links these nations together. They all have issues – and different issues at that to manage. Thailand has a longer term issue of political stability to address, and Indonesia has the presidential election coming up next year as the current incumbent, Susilo Bambang Yudhoyono, is barred from taking a third term.
Although the Philippines has had some stronger growth figures, the devastation of Typhoon Haiyan has of course had an impact, not least of which will be inflationary pressures on food and commodities. However don’t be fooled; all three nations may be down, but not out. The question will be which will be capable of getting up off the canvas first.
Oh yes and what about the bottom 10 Indices in the world?
Their time will come.
Justin Urquhart Stewart is the founder of Seven Investment Management and a regular media commentator. Originally trained as a lawyer, he has observed the retail market industry for 30 years whilst in corporate banking and stockbroking.