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by Dilara Mukhomedzhanova AS OF APRIL 2010 European Indices (UK, France, Germany, Switzerland)
There were two main phases of development on the European equity market from February to April 2010. Between early February and mid April, the markets rallied on the hope of no contagion from Greek concern, as well as strong earnings delivery, making new highs in the recovery rally since March 09. From mid April, the markets started weakening again due to renewed sovereign concerns, regulation and risk of Chinese slowdown, leading the markets to correct by close to 15% in local currency terms. The aid package announced by EU/ECB has short circuited the peripheral Europe bond markets sell off to a certain extent; however it is yet to contain the volatility in equity markets. The leading indicators for macro data flow remained robust for Europe during the period, with the EMU and Germany PMIs printing record high numbers in April reports and only marginal easing in May. These numbers remain consistent with 3% real GDP growth pace as compared to 1% Blue-chip forecast. Overall, the equity markets remain hostage to headline risk, dramatic volatility spike and consequent reduction in the trading books. However, there hasn't been decisive data deterioration so far to confirm the bear case. Australia, Hong Kong, Singapore
Hong Kong equity market stayed volatile in April amid ongoing concerns over China policy tightening and the re-emergence of threat over the sovereign debt issues in Europe. Hang Seng Index climbed to its three month high at 22,209 on April 9 before the market consolidated. The index was down 0.6%m/m with average daily turnover of HK$69bn. MSCI Hong Kong index dropped 2.9%m/m, underperformed MSCI China and the region by 2.3%m/m and 2.9%m/m respectively. Hong Kong property plays tumbled following last month’s rally, partly due to the property policies announced by the government during the month. Singapore demonstrated economic growth from the start of the year. The Monetary Authority of Singapore has moved to a stance of monetary tightening by re-centering the exchange rate band and orienting the policy band from zero appreciation to one of gradual appreciation. The MAS' moves indicate stronger confidence in the regional and global economic recovery. Japan (Nikkei 225)
Japanese GDP surged 4.9% annualized in 1Q, marking a fourth straight quarter of growth. Taking on board positive revisions to past quarters, Japan’s economy expanded at a 4.2% pace over the four quarters ended 1Q10, the fastest in the developed world. There was less growth in domestic demand than anticipated, and more reliance on net exports. Foreign investors continued to net purchase Japanese equities in February and March 2010. Japan’s total net portfolio flows recorded net outflow during the period, albeit slightly to the tune of JPY73.4bn after recording two consecutive weeks of net inflow. Korean (KOSPI)
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