Stock Markets’ 2015 Universal Ugly
Both the MSCI core and frontier benchmark indices dropped over 15 percent in 2015, with Hungary in the former and Estonia, Lebanon and Jamaica in the latter the only positive performers. The heaviest losers, with respective 50 percent and 60 percent declines, were Kazakhstan and Greece after lengthy devaluation and EU rescue sagas. In the main Asia gauge the China composite rallied toward year-end but still was off 10 percent, while India and Korea fell single digits and Indonesia, Malaysia and Thailand dipped 20 percent despite December’s formal launch of the ASEAN free-trade zone to coincide with the proposed Trans-Pacific Partnership with the US. The Obama Administration has made congressional ratification a priority in its final months despite opposition from the leading presidential candidates in both parties and labor groups. Latin America’s bloodbath featured 45 percent slides in Brazil and Colombia, and Peru was also off 30 percent as it prepares for frontier demotion with only three big liquid stocks. In Europe the Czech Republic and Poland shed over 20 percent and Turkey, 35 percent as Russia was ahead until further oil price damage in December causing a 5 percent loss. Middle East components Egypt, the UAE and Qatar were down more than 20 percent along with the sole African representative, South Africa.
On the MSCI Frontier, Gulf and MENA constituents were similarly weak with the exceptions of Jordan with just a 4 percent reversal. Ukraine, Bulgaria and Serbia were 30-40 percent lighter, while Romania gave back only 1 percent. Sub-Sahara African markets mostly slipped 20-40 percent, and Kenya which had avoided previous corrections was not spared on spreading finance official corruption reports. Argentina as the Latin American member fell 1 percent in dollar terms as the new Macri government abolished currency controls and export taxes, and elsewhere in the Caribbean hydrocarbon-dependent Trinidad and Tobago decreased 5 percent. In Asia Pakistan, Sri Lanka and Bangladesh were down 20 percent on average and Vietnam, seen as a key TPP beneficiary with its low-cost labor, ended with a 5 percent setback.
JP Morgan’s external bond EMBI measure in contrast was up 2 percent in 2015 on split direction from the dozen top countries. Ukraine, Venezuela, Argentina and Russia surged double-digits while Brazil, Colombia, Peru and South Africa slumped. Indonesia was essentially flat and the Philippines jumped 3 percent ahead of new presidential elections where a leading contender was recently disqualified on foreign citizenship grounds. Mexico (-2 percent) was a disappointment despite stable foreign investor holdings overall concentrated on local bonds, with $200 billion in Q3 trading volume outstripping rival instruments, according to EMTA’s latest survey. Activity plummeted 20 percent on annual basis to $1.1 trillion, with over 60 percent in domestic paper. Behind Mexico in the category were Brazil, China, India and South Africa. Eurobonds were almost even between corporate and sovereign, and Kazakhstan was a new entrant for the latter. Chinese trading was 10 percent of the total, and in a separate tally CDS, steady at $375 billion for the period, has also registered as hedge funds swap temporary calm for more dire credit distress and currency devaluation scenarios.
