Asian markets outperform US and European 

      counterparts

By Neil Behrmann

Asian markets have outpaced their North American and European
counterparts by a wide margin.

During the bear market, the few bullish strategists, were forecasting that Wall Street would outrun Asian markets until their exports recovered. Instead the Asian markets with smaller market capitalisations and greater volatility have bounced back with a vengeance.

The wires and financial press have concentrated on the global stock market surge from the lows of early March. In practice only lucky lottery ticket holders buy at the bottom and sell at the top. The rise over three months i.e. since mid February is probably a better reflection of realistic gains as it effectively irons out the extremes. The minority of bulls either began purchasing a few weeks before the bottom early March and growing numbers of optimists, towards the end of that month and in April.

India, Indonesia, China and Singapore are at the top of the tree with outstanding average gains of above 35 percent. Amongst the European major markets, Italy is the star rising by 24 percent the US market as measured by the MSCI Barra’s index is up by 20 per cent, compared with the S&P 500 rise of 29 percent from its nadir.

               Stock Market Performance (local currencies)

Market

Three months rise% to May 15

12 month decline%

Dividend yield %

Price Earnings ratio

India

40

-33

1.4

16.5

Indonesia

38

-33

3.8

12.3

China

37

-34

2.4

13.4

Singapore

36

-34

4.3

10.8

Thailand

29

-37

5.1

10.5

South Korea

29

-28

1.5

10.5

Taiwan

29

-33

5.2

21.8

Hong Kong

27

-35

3.9

13.7

Philippines

23

-17

3.9

10.8

Italy

24

-42

6.9

8.9

Canada

22

-33

3.2

13.7

Brazil

22

-36

4.7

9.6

US

20

-38

2.3

14.8

Germany

19

-40

4.0

14.7

France

17

-37

5.1

12.2

UK

14

-31

4.7

8.9

Malaysia

14

-22

4.6

14.7

Australia

13

-35

5.8

12.8

      

     Source: Marketpredict.com, MSCI Barra & FT

The true bottom of global markets was the panic after the Lehman crash during the early Northern hemisphere winter. In the US the number of new lows continued to fall when a further slide in financial stocks caused the S&P 500 to briefly touch the low of around 680 points, early March. Most other stocks were above their October/ November 2008 nadirs. Several Asian markets experienced similar trends and the same applied to Europe.


In the event of a downward adjustment following such a steep and swift rally, the big question is what Asian, Wall Street, London and other markets will do next. Will they shift into the next stage of an upturn on expectations of strong economic revival? On the other hand will markets languish in a flat, sideways trend or slide to the old lows?

The table shows that on average valuations, several markets, especially Asian, are still not expensive, provided there is not a further steep downward correction of the global economy. The best policy is to be patient, sift through the dross and apply intensive research and due diligence to find sound companies that can weather today’s uncertain business conditions.

 

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