First Quarter Update
Markets have recovered from the Shanghai surprise on Feb. 27, when the Shanghai Composite fell almost 9% on fears that the Chinese government would intervene to slow down the market. The Chinese market fell like, well, a brick, leaving a lot of the experts saying “I told you so. Don’t put more than 5% of your investments in developing markets.” The trouble, markets around the world also tumbled. International investments are no longer a hedge as they once were. For that matter gold and gold mining stocks aren’t either.
Even after its plunge, the Chinese stock market was the best performer among major emerging markets in the first quarter of 2007. The Dow Jones CBN 600 Index, which reflects about 80% of China’s market capitalization, has gained 42% in the first three months of the year.
The Shanghai Composite Index, which tracks shares listed on the larger of China’s two stock exchanges, has gained 19% year-to-date. The index rose 130% last year, making it the top performer among major benchmarks in 2006.
The second-best performing emerging market index in the first quarter was the Malaysia Composite Index, up nearly 14% on the year. The country’s major exports include electronics and electrical goods, oil and gas, and agricultural products. The Malaysian government appears to be encouraging economic growth.
Turkey’s IMKB-100 Index ranked third with a nearly 12% gain so far this year. The top performer of 2005, Turkey disappointed in 2006 with a decline of 1.7%.