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© Elliott R. Morss

March 2013

Introduction

Every so often, people who buy stocks, hopefully via mutual funds and/or exchange traded funds (ETFs) should stand back from their home stock markets and look at how the rest of the world is doing. In the following, I look at what has happened to markets since U.S. banks collapsed in 2008 and the extent of the recovery since then. I conclude with thoughts on how well the underlying economies of the countries covered will do in future years.

Equities: Collapse and Recovery

  1. Collapse

Table 1 goes back to the stock market peaks that occurred in either 2007 or early 2008. The "Peak/Trough Loss" is the percentage hit (peak to trough) the various markets took in the global collapse. And they are large: in an earlier piece, I concluded that globally, stock market losses were $36 trillion. Put that together with the estimated real estate losses of $16 trillion, and it is no wonder we had a global recession as consumption fell off sharply.

And looking at Table 1, it is clear that no country was spared. Greece and Russia lost more than 80% while Canada, Germany, Korea, Peru, Austria and India lost more than 70%. Relatively speaking, U.S. stock market losses were modest: investors only lost 48%!

Table 1. Stock Market Losses and Recovery, 2007 - 2013

Ticker/

Capitalization

Peak/Trough

Current as

Country

Index

(bil. US$)

% Loss

% Peak

P/E

Philippines

(PCOMP)

229

-42%

224%

n.a.

Indonesia

(IDX)

428

-51%

195%

14

Thailand

(THD)

390

-45%

179%

12

Argentina

Merval

34

-59%

150%

n.a.

Colombia

(GXG)

262

-35%

143%

14

Chile

(ECH)

313

-53%

122%

17

Turkey

(TUR)

315

-66%

121%

11

Mexico

(EWW)

525

-62%

114%

n.a.

Switzerland

(EWL)

1,233

-49%

104%

16

Singapore

FSSTI

765

-53%

102%

n.a.

US

^GSPC

18,668

-48%

101%

18

South Africa

(EZA)

908

-64%

87%

13

Korea

(EWY)

1,179

-71%

85%

9

Hong Kong

(EWH)

2,832

-60%

84%

16

Australia

(EWA)

1,387

-68%

79%

15

Canada

(EWC)

2,060

-76%

78%

14

Japan

(EWJ)

3,788

-50%

70%

15

India

MINDX

1,263

-73%

69%

n.a.

Germany

(EWG)

1,486

-76%

68%

12

United Kingdom

(EWU)

3,397

-63%

66%

11

Netherlands

(EWN)

329

-64%

64%

12

Ireland

(EIRL)

109

-69%

60%

17

Brazil

(EWZ)

1,227

-70%

56%

13

China

(FXI)

3,697

-69%

55%

9

Peru

(EPU)

103

-71%

54%

12

Russia

(RSX)

2,380

-81%

49%

n.a.

Spain

(EWP)

1,059

-68%

45%

11

Austria

(EWO)

106

-75%

45%

11

Italy

(EWI)

522

-67%

35%

11

Greece

ASE

45

-88%

23%

n.a.

Sources: Market Capitalizations: World Federation of Exchanges; Market

Changes: Indices and ETFs; Price Earnings Ratios: ETF and Exchange data

  1. Recovery

Looking again at Table 1, the second column from the right is the March 2013 price as percent of the peak price. Many Asian nations got beyond the global recession some time ago and have gone much higher. The U.S. just got back to its earlier peak. And then there are the euro countries at the bottom. I last wrote about these countries in October 2012 but nothing has changed: more political turmoil and riots ultimately causing the collapse of the eurozone.

Interpretation

While Table 1 does not include all countries with stock markets, it is complete enough to get a sense of what is happening. Europe - a disaster area - no country will be spared, not even the UK, as the eurozone collapses. What can be said about the other countries listed? As I have noted, forget about limiting global warming, it is here and will get worse.

The next 25 years will be defined by the frantic global search for more energy. China and India need all the energy they can get their hands on, including coal and nuclear. In addition, they need commodities, including food to satisfy their burgeoning middle classes.

Which countries on the Table 1 list are natural resource rich? Argentina, Australia, Brazil, Canada, Chile, Peru, Russia and South Africa. It does not matter much how badly the leaders of these countries screw things up: they have products the world needs. If you are looking for overseas equity investments, these resource-rich countries are worth considering.

Source: Equity Investing: A Global Perspective