MARKET WATCH
GLOBAL MARKET UPDATE BULLS LEADING IN 2012
2012 has turned out to be substantially different for financial markets than many had anticipated a couple of quarters back, when the euro area debt crisis was at its peak and concerns were running high that the economic bloc was heading towards collapse. But A 20 percent rally in the Japanese Nikkei stock market by March 2012 has fortunately, driven by heralded the comeback of the Japanese economy to a background of bullish market sentiment across Asia, Europe and the United States. (Image Corbis) some non-standard measures taken by the European Central Bank, investor confidence the world over has seen a substantial improvement. Apart from this, the recent agreement on restructuring the privately held debt of Greece, which has also qualified the country to avail its next bailout package (for more see Economic Barometer on page 48), has further calmed the nerves of investors and has raised hope that the much dreaded extreme case scenario of the euro area’s breakup has been avoided, at least for now. These positive developments are equally reflected in the global financial markets, which have sharply rebounded from the troughs witnessed last year. Leading this global rally is the benchmark index of United States’ (US) Dow Jones Industrial Index, which has once again recovered to the key 13,000 points mark after a gap of almost four years, and was up eight percent this year (until 15 March 2012). This renewed strength has come on the back of improving economic conditions, which has made many believe that the US has to an extent isolated itself from the euro area and is moving toward sustained recovery. The positive mood is reflected in euro area as well, where Germany’s DAX has gained a substantial 20 percent and France’s CAC is up 13 percent to date. In Asia, Japan’s recovery from last year’s natural disaster has lifted the investor mood and the benchmark index, Nikkei, has gained nearly 20 percent so far this year. This rebound is also driven by a recent move by the Bank of Japan of boosting the asset purchase program that has helped the domestic currency recover above JPY80 (QR3.54) against the US dollar, a level which was breached in July last year. A strong yen has been one of the key problems for the country that has weakened the economic activity by making exports less lucrative. Stock indices of the two fast emerging economic powers, China and India, have given good returns (China eight percent, India 13 percent) so far this year, but are however lagging behind their peers from major developed countries. This is because slowing economic growth in both the countries has compelled investors to withdraw a part of their investments, and the money is now being deployed in advanced nations where policymakers have continued to take strong initiatives to protect the economic recovery. But in all possibility this trend can last only in the short term as even with slowing economic growth, the expansion rate of both the countries will continue to outperform that of advanced countries.
by Dheeraj shahdadpuri
GCC Stock Indices Rebound The positive global economic mood is also reflected on the stock markets of the six nation Gulf Cooperation Council (GCC) bloc. Leading this year’s rally is the Dubai’s DFMGI which has gained a massive 24 percent after underperforming against its regional peers for the few years. This strong rebound has come on the back of improving performance of the Dubai’s core sectors (trading, transportation and logistics) and growing confidence that the Government Related Enterprises (GRE) will be able to manage their debt obligations in the coming years. Next in line is the Saudi’s Tadawul All Share Index (TASI), which has given investors a return of 18 percent. This has undoubtedly come on the back of a strong crude oil price that drives the revenues of the country, which is the biggest oil producer within the Organisation of Petroleum Exporting Countries, and second biggest in the world. The Qatar market is lagging behind its GCC peers this year as the benchmark index is trading nearly flat with marginal decline of 1.4 percent. This underperformance is due to the fact that the Qatar market has already enjoyed good returns over the last two years and in relative terms other regional peers have become more attractive at their current valuations.