In a drastic reversal of fortunes, the stock markets of developed countries such as Japan and the United States were big winners in 2013, while stock markets of most developing countries — previous top performers in 2012 — barely rose with some even registering negative returns.
Japan’s Nikkei 225 index, for example, was the world’s 4th best stock market in 2013, surging an unprecedented 56.72% in the past 12 months ending December.
Japan’s stock market records best performance in 6 years
During its last trading day of the year, the Nikkei 225 index booked its 9th consecutive rise in trading day, to close at 16,291.31. This was the Nikkei’s best performance in the last 6 years.
Japan’s export-oriented economy was buoyed by a depreciating currency in 2013, with the Japanese Yen falling the most against the US Dollar compared to other currencies. Exporters, like Japan, benefit more from a falling currency because their products become more competitively priced, or cheaper, to holders of US dollars who would import these products.
Japan also appears to have benefited from Abenomics, nicknamed after Prime Minister Shinzo Abe who led government reforms and initiated a new economic policy in an effort to end Japan’s 15 years of deflation. “Abenomics” centered on strong government spending as well as aggressive monetary easing on the part of Japan’s central bank.
US stocks rally to best performance in 18 years
Stocks in the United States also rallied last week, closing at record highs not seen in the last 18 years. The Dow Jones industrial average (DJIA) ended 2013 up 26.56%, closing at 16,576.66 on December 31.
Other US stock market indices even outperformed the Dow. On the last trading day of the year, the Standard & Poor’s 500 (S&P 500) index sealed its best performance since 1997, booking a full-year gain of 29.6%.
The NASDAQ composite fared even better, closing at 4,176.59 — a 1-year gain of 38.3% in 2013.
The Federal Reserve’s Quantitative Easing program looks like it worked last year, causing Gross Domestic Product (GDP) to rise while US unemployment slowed down.
Compare these double-digit returns of developed markets’ stock exchanges with that of developing markets that struggled in 2013.
Philippines, Turkey, Thailand stock exchanges underperformed
The Philippine Stock Exchange index (PSEi), for one, rose a modest 1.33% in 2013. (See PSEi Performance in 2013)
Turkey, whose stock market, was the 2nd best performer worldwide in 2012, suffered a steep drop in value last year. Turkey’s XU 100 index fell 13% amid public protests calling for the three-term Prime Minister to resign due to allegations of authoritarianism.
Meanwhile Thailand Stock Exchange, another best performer in 2012, recorded negative growth of 6.7% in 2013, following public unrest and dwindling foreign direct investments.
These and other stock markets of developing countries — which booked huge gains in 2012 — appeared to have lost steam last year, and may face further problems as funds are siphoned back to the US following the Federal Reserve’s taper of the QE program.
Here’s a summary of the best and worst stock markets in the world in 2013.
| PSEi Index Fund MF | Fund Manager |
|---|---|
| First Metro Save and Learn Philippine Index Fund | First Metro Asset Management Inc. |
| PAMI Equity Index Fund | Philam Asset Management, Inc |
| Philequity PSE Index Fund | Philequity Management, Inc. |
| Philippine Stock Index Fund | BPI Investment Management Inc. |
| Sun Life Prosperity Philippine Stock Index Fund | Sun Life Asset Management Company, Inc. |
Will these returns have a repeat this new year 2014? We’ll wait and see.
Sources: Bloomberg, Trading Economics, Yahoo Finance
