Emerging Markets Letdown

March 02, 2011

New numbers from S&P show big differences in developed and emerging market performance.

S&P Indices sent me an email recently with some fascinating data. It pulled together year-to-date numbers on developed and emerging world equity markets, showing how different countries performed in the first two months of 2011.

The data are surprising. One of the big investment themes of 2010 was the surprising outperformance of emerging markets equities. In particular, BRIC—Brazil, Russia, India and China—was the gateway to strong investment profits for those who moved in. Pundits everywhere proclaimed the surge would continue this year.

 

S&P Global Broad Market Index (BMI) Global, Feb. 28, 2011
Developed Markets
BMI Member 1-MONTH YTD 3-MONTH 1-YEAR 3-YEAR
Global 2.76% 4.13% 11.92% 20.66% -4.57%
Global Ex-U.S. 2.24% 2.99% 11.27% 19.47% -10.00%
Developed 3.19% 5.28% 13.33% 21.00% -4.80%
Dev Ex-U.S. 2.94% 4.91% 13.82% 19.81% -11.58%
Canada 7.16% 7.02% 15.28% 33.01% 6.24%
Norway 6.82% 5.65% 24.94% 29.88% -13.59%
Ireland 5.55% 7.43% 21.83% 4.12% -55.23%
Japan 4.50% 4.74% 13.07% 15.77% -8.63%
Australia 3.86% 1.08% 12.17% 19.61% -3.23%
United Kingdom 3.83% 5.78% 13.78% 21.49% -14.76%
France 3.56% 10.70% 20.38% 15.60% -16.86%
United States 3.46% 5.69% 12.80% 22.39% 3.54%
Netherlands 3.43% 7.18% 19.07% 16.92% -16.47%
Germany 3.22% 7.36% 15.49% 28.71% -14.17%
Switzerland 2.91% 2.13% 12.05% 14.91% 1.36%
Denmark 2.72% 5.47% 16.44% 31.30% -4.58%
Italy 2.68% 13.75% 24.12% 8.42% -39.10%
Belgium 2.60% 4.95% 11.12% 9.35% -39.36%
Portugal 2.31% 8.57% 14.89% 6.79% -33.83%
Austria 1.26% 3.09% 19.24% 22.66% -30.98%
Greece 1.16% 13.20% 16.41% -22.10% -68.84%
Spain 1.00% 13.56% 24.48% 4.44% -30.17%
Luxembourg 0.17% 0.37% 16.55% 5.42% -37.85%
Sweden -0.07% 3.41% 15.02% 37.03% 11.88%
Israel -1.84% -5.44% 1.82% -1.28% 4.62%
New Zealand -1.96% -1.64% 3.74% 10.23% -24.20%
Hong Kong -3.48% -2.14% -1.45% 22.56% 4.94%
Finland -4.21% -0.82% 11.04% 10.24% -41.46%
Singapore -4.96% -5.46% -0.57% 17.71% 2.63%
Korea -6.64% -4.21% 6.03% 27.28% -1.79%

 

That didn’t happen. As S&P’s new data show, emerging markets have consistently underperformed since the beginning of the year. Instead, the new global investment story is one about the rebalancing of performance toward developed market equities—and some of that performance comes from markets that suffered at this time last year.

So far in 2011, developed markets are up more than 5 percent, with a 3 percent gain in February alone. This outperformance comes from surprising sources—old-world European countries that traditionally have hidden behind other strong performers.

Italy boasts gains of almost 14 percent so far this year, leading the charge from developed markets, while Canada shows the strongest gains in February with over 7 percent. Countries like France, Greece and Spain all have double-digit performance stats—Spain posts a 13.5 percent performance, with Greece right behind it at 13.2 percent. France and Portugal round out the top five, returning almost 11 percent and nearly 9 percent, respectively.

Portugal! It’s not often you see talking heads like me expound on the strong returns from Portugal, but here we are.

One thing the data spell out: Don’t discount any market out of hand. Historical performance doesn’t predict future results. Investors betting on the rise of traditional hotbeds of performance like Brazil and China have watched those bets fall short. Those that kept their eyes on Europe are likely much happier.

That’s not to say that all the emerging markets are down, however. Even though many of the much-hyped markets sag under the weight of high food prices, bank policy tightening and, in Egypt’s case, geopolitical issues, there are some surprising performers in the bunch. The data here might be even more important to analyze ...

 

 

Find your next ETF

Reset All