Market Quote: Emerging Markets’ Diversification, Europe’s Concentration
Author: The editor's desk
April 10, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Mixed Up (and Down)
Emerging market (EM) stocks have realized modest gains relative to many of their developed market counterparts so far this year, but there has been a wide dispersion in returns within the universe of developing countries.
Notably, the MSCI Taiwan Index was up 12.5% through March, while the MSCI India Index gained 6%. Outside of emerging Asia, meanwhile, the MSCI Turkey Index performed well – up 14.6% — through the first quarter as did the MSCI Greece Index, which returned 6.5%. And in Latin America, both the MSCI Peru Index (15.5%) and MSCI Colombia Index (12.5%) netted double-digit gains, largely given their exposure to rising prices for commodities like oil and copper.
The weak link in EM equities remains China which has underperformed the past three years, including this past quarter. In the first three months of the year, the MSCI China Index was down 2%, but the index finished March in positive territory and we’re starting to see green shoots in China with better economic data.
Losing Concentration
European equity markets have been experiencing some of the same concentration issues that have been much talked about in the United States, whereby just a handful of stocks have contributed the lion’s share of returns in the past few months.
In fact, Goldman Sachs recently highlighted eight “GRANOLAS” stocks as being the main drivers of European returns so far this year, but really it was even tighter than that. Just five stocks, at one stage, accounted for 110% of the overall market return. Thankfully, this effect faded in March and the market returns have become more broad-based since then.
Also top of mind these days is Europe’s banking sector. A number of the large-cap European banks saw their share prices collapse as much as 10% on the day they released quarterly earnings, only to rebound strongly into the quarter as the market took a less negative view towards the results and a more positive stance on their valuations.
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