Stocks’ Crisis Retrospective Run-Ups

Thirty years after the 1987 New York Stock exchange 25 percent crash and a decade on from the 2008 financial crisis, MSCI core and frontier indices turned in respective 25 percent and 20 percent gains through Q3 for the best performance since 2010. Only Russia and Gulf country indices under trade and financial boycotts were down, alongside refugee emergency-hit Jordan and Lebanon, recent main gauge returnee Pakistan and tiny Botswana. The BRIC component overall was superior with a 30 percent advance, while Poland (+45 percent) led the big roster and Argentina and Ghana on the other one were ahead 60-70 percent. Zimbabwe recorded a stratospheric 250 percent jump through September with the stock exchange the only outlet to preserve savings, with draconian bank deposit withdrawal limits and new borrowing from the African Export-Import Bank to inject emergency dollars. China “A” shares after MSCI’s marginal index addition have surged to almost narrow the gap with the broader mainland 40 percent increase ahead of the Party Congress due to reappoint President Xi and his designated team, which could include well-known economic reformers and technocrats. On the eve monetary policy was loosened through a reserve requirement nudge for dedicated small business credit, as authorities seek otherwise to cap real-estate related personal lending.

Elsewhere in Asia Korea (+30 percent) brushed off border bellicosity, amid harsh rhetoric from Pyongyang against Seoul and the US and a series of test nuclear missile launches. Tech firms were in a sweet spot in the earnings and global manufacturing cycle, helping to overcome Chinese restrictions on consumer goods and Washington’s threat to renegotiate its bilateral trade pact. India (+22.5 percent) faded on demonetization and national sales tax hangovers which have crushed average entrepreneurs and assembly operations, while Indonesia was another 10 percent behind as religion and politics mixed more dangerously with loud calls for more action to protect the Muslim minority Rohingya fleeing Myanmar for makeshift camps in Bangladesh, where the market rose almost 10 percent.

In Latin America Brazil (+25 percent) roared back during the quarter after lagging, as investors were spared a second impeachment even though President Temer remains under criminal investigation  for alleged bribery and his party and allies are unlikely to pass overdue state pension cutbacks to restrain the 10 percent of GDP fiscal deficit. Mexico had the same showing as Pemex private sector exploration auctions proved popular and NAFTA reworking talks appeared to dismiss total breakup with Canada’s views closely aligned. Chile (+30 percent) was at the crest before the first round of presidential elections likely to return free market business magnate Pinera to the post. In Europe behind Poland, Hungary and Turkey each climbed over 25 percent on domestic demand juiced by state lending programs as relations further soured with the EU. Prime Minister Orban has defied Brussels on immigration quotas and President Erdogan accuses it of reneging on visa-free travel promised in exchange for additional Syrian refugee acceptance on transfer from Greece. There after Europe’s biggest run last year improvement is just over 10 percent as banks await another cycle of asset reviews which may reflect crisis respite short of repair to again rouse international community urgency.