Thursday, 16 August 2012

Stock Market Status Update - BRIC

With the recent market rally in the US stock market, the S&P 500 is almost back to its year high.  At this point, lets check in on where the "emerging" market BRIC countries are.  Lets get started:

Brazil Bovespa Index: The Brazil index is close to where it started at the beginning of the year.  It had a strong climb of ~17% to a peak in March whereupon it broke down dramatically at the onset of the Europe crisis and China slowdown and still have yet to recover to its year high.  With Brazil's reliance on commodities, global growth, and its strengthening currency, the path looks rocky still for the rest of the year.

China, Russia, and India after the break.

India Sensex: Surprisingly strong performance of 14.3% for India for 2012 so far (though this masks a very weak 2011).  Similar to US performance, there was a strong movement from January, peaking in mid February (earlier than Mar-Apr peak for most other countries however), big drop in May and a slow recovery back up.  India's troubles are high inflation, high interest rate (with a limited ability to ease), and a weak corrupt ineffective government.  With its promising demographic shift (largest # of maturing adult workers in the world), it still has potential, the question is whether they can put in place policies that makes use of it.

Russia RTS: Russia shows a similar chart profile to the other BRICs, especially Brazil.  However, the RTS is still 7% below its starting point and a full 17.5% below its peak in Mar.  Its issues are government policies, heavy reliance of commodities like oil (which has fallen quite a bit this year), and potentially political unrest.  Russia is basically a commodity play for now, for better or for worse.

China Shanghai SEC: Ah...China, arguably the most influential country in the world right now from a global economy perspective.  For a country with 7-8% GDP growth, you would expect a growing stock market, instead its been on a downward trajectory ever since the start of the financial crisis (still a ~50% drop from its 2007 peak).  

Year to date, the Shanghai index is almost completely flat and unlike the other BRIC and US markets which started a recovery in June, it has continued to drop, falling an additional 9% since June, in sharp contrast to the S&P 500's 11% rise.  Of course China's issue revolves around its slowing economy and the Europe recession (its biggest trading partner).  While its GDP is still growing, China's stock market has continued to refuse to recover for a number of reasons which will be the subject of a later post.  

US S&P 500: Needs no introduction.  A strong 12% climb from the beginning of the year, large 10% correction in the middle, and a slow and volatile climb back to the peak.  

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