The analysis and associated heat map is based on a Mauritian investor perspective and thus takes into account both the return from equity markets and the return due to currency movements. All data was sourced from Bloomberg.
1. Summary information on the equity market returns during 2014:
a. 42 out of the 85 countries analysed delivered positive returns.
b. The highest return was China with 51% and the lowest was Russia with -40%.
c. The range between the best and worst return was 91.1%.
d. The average return in MUR was 1.2%.
2. When investing, you need to have patience. China delivered the best performance in USD terms when compared to any other country’s stock market. However, between January and June the Chinese stock market remained relatively unchanged before rising 48.6% in the last 6 months of the year (two thirds of this return happened in the last quarter alone).
3. Investing based on acronyms did not really work out. BRIC’s – Brazil was ranked 66th with -9.7%, Russia was ranked 85th with -40%, India was 5th with +30%, and China was 1st with +51%. MINT did not do any better – Mexico was ranked 62nd with -7.3%, Indonesia was ranked 10th with +23.2%, Nigeria was 80th with -21.6%, and Turkey was 18th with +17.7%.
4. In fact, investing based on acronyms was a good way to lose money. PIGS performed very badly with Portugal ranked 83rd with -31.4%, Italy ranked 63rd with -7.6%, Greece ranked 84th with -33.4% and Spain ranked 53rd with -4.5%.
5. Jim O’neil who coined the BRIC’s acronym also identified the “Next 11” countries that had a high probability of becoming the world’s largest economies in the 21st century. These markets performed strongly as a group. Bangladesh ranked 8th, Egypt 5th, Indonesia 10th, Mexico 62nd, Nigeria 80th, Pakistan 4th, Philippines 9th, Turkey 14. (Iran was the 11th country but is not included in our analysis). Only two of the countries in the Next 11’ had negative returns.
6. Africa stands out for the big grey space. The picture only shows 11 countries because of data accessibility issues. This is one reason why we at MCB Capital Markets believe there is such a big opportunity in Africa. A large part of this opportunity is the creation of new stock markets, attracting new companies to these markets, and indeed making the data of these companies and exchanges accessible to investors.
7. Asia stands out due the sizeable amount of green. 10 out of the top 21 performing exchanges are in Asia. Drilling deeper; 9 out of the top 20, 6 out of the top 10, and 3 out of the top 5 are Asian countries.
8. Given the turmoil in Europe during 2014, one could have guessed that Europe as a whole was not a good place to invest. The sizeable amount of orange and red confirms this. 16 out of the worst 21 performing exchanges were in Europe. Drilling deeper; 15 out of the bottom 20, 7 out of the bottom 10, and the worst 5 are European exchanges.
9. The countries with the lowest risk (measured by 360 day volatility) are Botswana, Mauritius, Ecuador, Lebanon, and Tunisia in that order.
10. The top 3 countries that provided the best return per unit of risk were Ecuador, Sri Lanka, and China.
11. A question often asked is do stock markets globally move together or do clusters of stock markets move together? The picture paints a good argument for regionalisation being a more dominant theme than globalisation. The ASEAN region, China, India, and Pakistan region is very green, a lot of Sub Saharan Africa is yellow & orange, and Europe is a messy orange and red.
12. Statistical rules tell us that 95% of observations will have been between +33.6 and -31.2%. If you were outside this range you either have to sack your financial advisor or buy him / her some champagne.