World Markets Weekend Review: A Generally Good Week With 2 Asian Extremes

by: Doug Short

The eight world markets on my watchlist had a generally good week, with the average of the eight coming in at 0.87%. Five of the eight were clustered in a fairly narrow range from 0.50% (the S&P 500) to 0.85% (the Nikkei 225). Germany's DAXK fared better with a weekly gain of 1.32%. But the attention grabbers were the two extremes. India's SENSEX rose 4.50%, which is almost as much as the other six positive indexes combined. At the other end is China's Shanghai Composite, down 2.33% for the week.

In fact, the Shanghai remains the only the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. See the table inset (lower right) in the chart below. The Shanghai Composite, the chronic big loser, is now down a whopping 42.96% from its interim high of August 2009. At the other end of the inset, the S&P 500 is now only 3.38% off its interim high, set in mid-September, the day after QE3 was announced. The FTSE 100 is close behind at 3.69% from its interim high of February 2011.

As for year-to-date performance, here is a table highlighting the 2012 year-to-date gains, sorted in that order, and the 2012 interim highs for the eight indexes. India's SENSEX has the top spot, up over 25% for the year and sitting on its YTD high. Germany's DAXK is in second, with the Hang Seng not far behind in to third place. In contrast, the Shanghai continues to hold the dubious distinction of being the only index with a YTD loss, down 9.97%.

A Closer Look at the Last Four Weeks

The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

A Longer Look Back

Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Mumbai SENSEX, Hang Seng) is readily apparent, especially the SENSEX, but the trend over the past two years has not been their friend (make that three years for the Shanghai).