Emerging Markets

17/12/2008

Emerging equity markets delivered a negative return in November against a background of ongoing volatility in global stockmarkets. Concerns about the prospects for the global economy continued to weigh on investor sentiment, with oil prices maintaining their downward trend. On the positive side, central banks in several developed and emerging markets reduced interest rates in response to the weakening economic outlook, while the US government’s bailout of banking giant Citigroup also cheered investors. The energy-dominated Russian market was among the weakest performing emerging markets against a background of lower oil prices, while the country’s central bank raised interest rates during the month. Korea was also one of the weakest performers, with local currency depreciation having a large negative impact on performance in US dollar terms. Over the month, the Korean central bank reduced interest rates and the government announced a fiscal stimulus package equivalent to around 1.5% of GDP. Peru and China were among the best performers. The Peruvian economy continues to perform strongly, with data released over the month showing GDP growing by 9.9% year-on-year in September. The MSCI China index benefited from an unexpectedly large reduction in interest rates (108 basis points) by the People’s Bank of China. In other developments, the Chinese authorities announced a significant fiscal package to stimulate infrastructure and housing investment.