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Global Equities (Excluding U.S.)

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by Simreet Gill
J.P. Morgan Investment Analytics & Consulting
simreet.k.gill@jpmorgan.com

As of May 2009

Europe

Source: J.P. Morgan Investment Analytics & Consulting, Bloomberg, Rimes.

In the last 3 months through May, the European equity market have performed extraordinarily well on the back of improvements in the macro dataflow. Most equity indexes rallied 30-40pc from their March lows, with cyclical sectors and financial stocks outperforming strongly. Cyclical indicators such as ISM, global PMI or Chinese data are showing signs of stabilization, admittedly from an extremely low level, while most credit indictors are back to their pre-Lehman collapse level. New credit issuance has been very strong year to date and is getting accepted well by investors. (Morgan Markets)
The strong performance in equities was led by the cyclical sector which outperformed the defensive sector by more than 20%. At stock level, “low-quality” names did very well during the rally (broadly defined as the most leveraged, the biggest underperformers, lower ROE and “value” stocks). The fundamental factors, such as earnings momentum, did badly, actually showing an inverse correlation with stocks’ relative performance. (Morgan Markets)

Australia, Hong Kong, Singapore

Source: J.P. Morgan Investment Analytics & Consulting, Bloomberg.

Korean (KOSPI)

Source: J.P. Morgan Investment Analytics & Consulting, Bloomberg.

Japan (Nikkei 225)

Source: J.P. Morgan Investment Analytics & Consulting, Bloomberg.

The latest economic releases from China appear consistent with a return to trend growth or better in the current quarter, led by solid expansion in domestic demand. Fixed-asset investment accelerated to a pace of 33.9% over year ago in April, rivaling the peak rates of the past decade. Details show that fiscal stimulus is driving the acceleration, with government-supported categories including transportation, the power grid, housing, and health care being targeted for expansion, while private housing investment also bottomed out. (Morgan Markets)
Strong Chinese activity data and rising commodity prices are inducing more investors into EM equities. Global retail continues to switch from developed to emerging stocks, by over US$23 billion over the past three months. (Morgan Markets)
While recovery is expected in the Japanese equity markets, the 1Q09 MoF corporate survey revealed that the domestic sales and profits plunged further in 1Q led by the manufacturing sector. This was the first loss for the sector since the record began in 1954 and the firms are likely to cut back their capex in coming quarters. (Morgan Markets)
In Korea, Real GDP grew 0.2% q/q (seasonally adjusted annual rate) in 1Q09, after falling a sharp 18.8% in 4Q08. Private sector activity contracted further, but still at a milder pace than in 4Q and slightly more than offset by public sector spending on infrastructure. (Morgan Markets)