• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Tania Kishore Jaleel

Mumbai, Oct. 31 Investors across the globe are now sobbing at the sink, from singing in the shower just at the beginning of the year.

Investors in the emerging markets have suffered more than those in the developed world, a comparison of benchmark indices indicates.

In October, Russia’s RTS has shed 36 per cent; Brazil’s Bovespa lost almost 25 per cent and the Korea’s Kospi came down 24.6 per cent. In India, the 30-share Sensex has fallen close to 24 per cent and the broader Nifty almost 27 per cent. Dubai Financial Market has dropped more than 28 per cent.

The fall is less stark in the developed markets. The Dow Jones Industrial Average has shed only 15 per cent in October. The NASDAQ has fallen 18 per cent, London’s FTSE shed 13.4 per cent, Germany’s DAX lost 16 per cent, Australia’s ASX 200 came down 12.6 per cent and the Nikkei and the Hang Seng have declined 20 per cent each.

Marketmen say this is common during a bear run.

“A simple thumb rule is that emerging markets are twice as volatile relative to emerged markets. In a bull market, emerging markets rise more than the developed markets, while in a bear market, they fall more,” said Mr Saurabh Mukherjea, head of Indian equities at Noble Group.

“Given the current legislation in the US and the Euro zone to design and implement the bailout packages as response to this financial crisis, credit restraints will be an impediment to growth over the next 18-24 months in these markets. The credit crunch is hitting consumer and business spendings severely and has just started. The saving grace for Global GDP growth in 2009 is the resilience of the Emerging Markets (EM) that are growing much higher than the developed economies. This is resulting in the huge sell off in all equity markets,” said a recent report from Ambit Capital.

When the going was good till December last year, the emerging markets topped the list of gainers.

Last year, China’s Shanghai Composite, Sensex, Bovespa, Kospi and Russia’s RTS had gone up between 20 per cent and 97 per cent, whereas markets such as Hang Seng, Dow Jones, Nikkei and FTSE posted returns of between 11 per cent and 39 per cent.

Mr Mukherjea explained that this volatility is driven by earnings growth. The range of fluctuation in earnings growth in the developed markets is 5 to 15 per cent whereas in the emerging markets it could be between 5 and 30 per cent.

Foreign institutions have been net sellers of equity to the tune of $13 billion so far this year, whereas they were net buyers of securities for more than $17 billion in 2007.

“Equity market downside is now limited, but trend upside will not occur until an uptrend in corporate earnings growth is apparent probably during mid 2009,” said a recent report from Credit Suisse

More Stories on : Stock Markets | Foreign Institutional Investors

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line