Weekly international investment round up to 21 April 2009
Spring is always a good time to look for green shoots and after such a long cold winter could it really be investors are starting to see some greenery?
Actually, for investors in BRICs (the group of four major emerging market economies namely Brazil, Russia, India and China) things have been quite rosy since the beginning of the year. Since then, China’s main stock exchange the Shanghai Composite Index has mushroomed by 40 per cent, Russia’s RTS by almost 30 per cent, Brazil’s Bovespa has blossomed by over 20 per cent while even India’s BSE Sensex has grown by close to 14 per cent.
This isn’t to say things aren’t still tough in the real world and could easily get worse but if we accept that the markets act like a kind of barometer maybe the intense period of high pressure we have been experiencing is passing or at the very least easing for a while.
Some leading figures are even hinting at tentative signs of recovery. In a recent address President Obama said that while “there is no doubt times are still tough and by no means are we out of the woods just yet from where we stand, for the very first time, we are beginning to see glimmers of hope.”
Also commenting upon the situation which he called “one of the most difficult financial and economic episodes in modern history”, Head of the US central bank Ben Bernanke added to this more optimistic tone by stating: “recently we have seen tentative signs that the sharp decline in economic activity may be slowing. A levelling out of economic activity is the first step toward recovery.”
Clearly, these two main American economic figures are hoping that the financial system and credit markets are now stabilising and that their huge stimulus measures have now found a little fertile ground.
The tug-of-war between sustained future market growth and the carnage caused by the financial crisis in the here-and-now is set to continue for quite a while longer with many calling any market rally just a short-term ‘bear market bounce’ and based upon the IMF’s most recent data which suggests the world economy will shrink by between 0.50 per cent and 1 per cent this year, representing the largest contraction since the Great Depression, any green shoots which may be sprouting could be quickly killed off by such frosty forecasts.
Nonetheless, amid the gloom there are some real glimmers. America’s largest bank, Bank of America, has announced first quarter net income of $4.2 billion up from $1.2 billion during the same period last year. UK house prices rose for a third month in April according to data issued by Rightmove Plc and even the recession hit motor industry is feeling little more hopeful as Chinese domestic car sales hit a monthly record high of 1.11 million vehicles sold in March, exceeding US sales figures for a third straight month.
While sentiment in the herd may still largely be negative and it’s true that all boats float or sink with the tide, isn’t it amazing how some are still surprised when spring follows winter?