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by Dilara Mukhomedzhanova AS OF JANUARY 2011 European Indices (UK, France, Germany, Switzerland)
European equity markets rallied in the fourth quarter and early 2011 due to the re-acceleration of economic activity in developed markets and the second wave of quantitative easing in the US. Cyclical sectors outperformed the broad market by ~7% with top performers including Metals & Mining, Autos, and Chemicals, while the Defensive sectors underperformed. With the end of the fourth quarter, Cyclicals ended a second year of outperformance. Economic activity accelerated during the quarter as EMU composite PMI started moving higher after the trough in October and went on to new cycle highs in Feb 2011. Australia, Hong Kong, Singapore
The ASX200 index ended a see-saw year on a positive note, gaining 3.5% in December. The Resources sector (+6.1%) outperformed for the fourth month in a row. The ASX200 inched 0.2% higher in January 2011, exhibiting the tightest monthly range for the index since February 2005. Markets were rattled during the month by unrest in Algeria and Egypt, which boosted oil prices. Since Oct 2010, MSCI China only rose 0.8%, underperforming MSCI EM by 4.6%, due to rising CPI concerns and a series of policy tightening measures such as interest rate hikes, strictly follow the quarterly lending quotas for banks, and the crackdown on the housing sector. Energy was the best performer (up 14.6%), followed by Financials (+2.3%), and IT (+11.7%). Hang Seng Index closed up marginally by 0.1% m/m and up 5.3%YTD. Markets stayed sluggish in December amid concerns over monetary policy tightening in China. PBoC announed rate hikes in one-year lending and deposit rates to curb inflation. For 2010, MSCI HK has outperformed MSCI APxJ and MSCI World index significantly by 12% and 9.6%. Hong Kong shares held up well in January despite further monetary tightening in China and concerns over Egypt’s political crisis. The FTSE Straits Times Index ended December 2010 up 10.2% for the year, and gained 1.4% M/M, underperforming the MSCI Asia ex Japan index by 5%. The Singapore dollar closed the year off close to its record high against the U.S. dollar (+8.3% against the U.S. dollar for the year). In January 2011, the index ended down 0.3%. Japan (Nikkei 225)
Real GDP in Japan contracted, dragged by private consumption, public investment, and exports. The BoJ real export index rose a robust 7.3% m/m in December, recovering virtually all of its decline over the previous four months (7.2% in total). Korea (KOSPI)
South Korean KOKOSPI edged up 0.9% to 2,069.73 in January after five consecutive monthly rises. GDP rose 2.2% q/q saar in 4Q10, with manufacturing output and construction down 2.7% and 19.4% to offset the acceleration in services.
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