Last year was one that most emerging market investors would probably like to forget. MSCI’s main equity index fell 5 percent, bond returns were 6-8 percent in the red and some currencies lost up to 20 percent against the dollar. Here are some flow numbers from EPFR Global, the Boston-based agency that released some provisional annual data to its clients late last week.
The frontier markets juggernaut continues. Here’s a great graphic from Bank of America/Merrill Lynch showing the diverging fund flow dynamic into frontier and emerging equity markets.
The headline news from our Reuters asset allocation polls this month was that not much has changed from December in terms of overall investment positioning, but that there was a decided shift from emerging markets and European stocks to North America.
There is no question that the losses on stock markets at the moment are primarily the result of the Greek crisis. A downgrade of a euro zone country’s sovereign debt to junk is enough to make all but insane mainstream investors take a large step away from risk.
Slightly strange data from Deutsche Börse. Its latest survey of what top European executives have been doing shows increasing signs of optimism. That is, management board and supervisory board members and their families have been buying shares in their own companies.
Let’s not beat about the bush: the winners in this year’s investment stakes were those who cashed out early in the financial crisis, looked at hugely oversold stock markets in March and jumped back in. The losers were those who spent too much time thinking about it or, worse, thought it was a good idea to put all their money in Dubai stocks and Greek government debt.
The title of this post is taken from two sources. One was a headline in British tabloid, The Sun, in January 1979, when then-prime minister James Callaghan denied that strike-torn Britain was in chaos. The second was the title of a 1975 album by prog rock band Supertramp that famously showed someone sunbathing amidst the grey awfulness of the declining industrial landscape.
Last week was one of the worst for global equities in a long time. MSCI’s benchmark all-country index fell 4.3 percent, the most it has lost since the week ending March 8, just before this year’s stunning rally began. Emerging market stocks, meanwhile, dropped 5.6 percent in the week, the largest fall since mid- to late-February.
It says a lot about the way investors are thinking at the moment that very good earnings from Goldman Sachs were greeted with a mini-stock selloff and a bounce for the dollar. But it is not that people are glum and selling even on good news — more a case of them being so ebullient that anything which is not outlandish is a disappointment.