Stock Markets’ Swirling Snapback Snub

MSCI core and frontier indices cancelled each other out with a respective 3 percent gain and decline through the first half, as momentum flagged on a combination of region-specific event and lingering global debt and growth woes. Europe stumbled with the Brexit surprise, while Asia felt a temporary safe haven surge and Latin America moved with commodity and new leadership shifts. The BRIC category was down 1 percent as poor China and India performance was a drag, although losses were confined to single digits. Indonesia jumped almost 15 percent as big emerging economy flows were diverted and a rate cut preserved 5 percent GDP expansion. Thailand (+17 percent) was the Asian winner after another public investment package was announced despite the junta’s continuing unpopularity and unwillingness to set a civilian rule return timetable. The Philippines finished right behind Jakarta as President Duterte was inaugurated in a no-frills ceremony on a tough law and order and prudent economic management platform expected to appoint technocrats to top economic policy positions. Taiwan outpaced the mainland with a 6 percent rise as its first female president took office and shied away from cross-strait anti-free trade talk prominent during the campaign. Korea (+ 2 percent) got end-period allocation with sudden post-Brexit yen appreciation aiding international competiveness and fiscal stimulus to help domestic demand. In Central Europe only Hungary (+9 percent) stayed positive after the EU’s first departure as Greece( -23 percent) was at the bottom of the overall index with its own Grexit specter revisited despite the Troika’s approval of a delayed EUR 7.5 billion infusion. Russia (+20 percent) was the runaway leader while Turkey managed half that advance in the face of an Istanbul airport terror strike with tourism already off 50 percent year to date. Latin America had the pacesetters Brazil and Peru, both ahead over 40 percent with veteran politicians in charge promising to enact overdue structural reforms. The former also expects a lift from the summer Rio Olympics, despite the host’s emergency bailout appeal to the federal government. The latter elected a former Finance Minister and private equity executive president and staved off MSCI demotion to frontier status with a push to increase listings and foreign investor access.

Latin America’s sole frontier representative Argentina (+17) percent was the pack best there, as IPOs appeared after a long absence and the capital account swelled on flight repatriation and record external bond issuance. Europe suffered from Brexit reverberations, but the Baltics were relatively insulated and Ukraine was up 5 percent with the IMF due to disburse a withheld program installment in the near future. Pakistan (+10 percent) was buoyed by restoration of core universe standing and near completion of its Fund arrangement, while Bangladesh (+3 percent) began to turn sentiment with a crackdown on Islamic fundamentalists allegedly responsible for plotting journalist attacks. In Africa Ghana and Nigeria both tumbled over 20 percent as the latter was at the frontier bottom post-devaluation. Kenya was barely positive with party acrimony and rally incidents heading into another presidential election, while Zimbabwe (-6 percent) slid on severe dollar shortage and confusion over local currency reintroduction and President Mugabe’s health, with no successor in line unlike the queues at ATMs and supermarket