By Lachman Balani
In 2014, China was the world’s stock star. Last year it was Russia. This year the BRICS (Brazil, Russia, India, China and South Africa) countries strike a hat trick as Brazil despite its many woes, the biggest being the impeachment of its president Dilma Rousseff, breezed through to being the top performing index amongst the most watched bourses of the world gaining 39% for the year. It went from being the worst performing index in 2015, losing 13.31%, to the best.
The other surprise was Russia, whose MICEX gained another 26% this year duplicating last year’s rise.
Canada’s TSX gained a healthy 17% after losing 11% last year.
The year 2016 has been a good year for practically all major indices in spite of hitting lows in January, spurred late in the year by the Trump-bump after Donald Trump’s historic upset and win in the US elections. The only loser by a wide margin was China’s SSE composite losing 12.31%.
The UK’s FTSE closed at its all time high in 2016 despite the Brexit referendum, which mavens said would see the UK suffer. The big 3 of the US, Dow Jones, Nasdaq and S&P500 all reached their highest highs.
South Korea’s KOSPI with all its major brands like Samsung, Daewoo, LG, KIA and many more only gained 3.32 %.
The European Union continuing their pursuit of quantitative easing helped the DAX and CAC move upwards
It is also worth mentioning that Argentina and Austria fared well.
Gold after gaining a lot of ground during the year was up only 8.7% ending the year at USD1152 an oz from USD1060 at the end of last year.
Oil, after losing heavily in the beginning of the year going down to the USD26-USD27 per barrel range, regained composure to end in the USD53 range up from USD37 at the end of last year- a gain of 43% for the year.
Another important factor is the US 10 year bond yield. 2015 ended with the 10 year yields in the 2.2% range and most pundits before the US elections were betting that the yields would end lower this year but instead right after Trump’s win they went up from the 1.8% range to end the year in the 2.4% range, wiping out trillions of dollars from the bond market (yields move inversely to bond prices, so if yields go up, bond prices go down). Trump’s win really upset the bond market cart both in the US and Canada where yields have gone up as well giving rise to higher fixed term mortgage rates.
On another note, India’s 10 year yields have been doing the reverse, dropping since early this year from the 7.7% region to the 6.4% region propping up its bond market. Fixed income vehicles have done really well in India even before demonetization.
As regards the major currencies, the pound sterling took a lot of pounding right after Brexit and continues to get pounded from USD1.48 at the end of last year to USD1.23 . The Japanese yen despite its roller coaster ride this year from 120 to the USD to 100 yen and now at around 117, it is still stronger than the beginning of the year. The Euro also lsot ground from USD1.09 to USD 1.05. Our candy got a bit sweeter strengthening from 72.2 cents to 74.4 cents.
So what does 2017 hold? That is anybody’s guess. Most pundits are divided as some say that valuations are high and that will produce headwinds for the stock market. Others say that the Trump effect will last through 2017 and the US markets will rise especially since he wishes to introduce fiscal stimulus and lower taxes. Unfortunately pundits and gurus have been wrong so often in the recent past that practically no one believes what they say.
And Canada ? Well, we have much to rejoice as we celebrate our sesquicentennial year. Let’s hope our stock markets will share in the elation!
BOURSE Dec 2016 Dec 2015 % change
Bovespa (Brazil) 60277.29 43349.96 +39.04%
MICEX (Russia) 2232.72 1761.36 +26.76%
TSX (Canada) 15287.59 13009.95 +17.44%
FTSE (UK) 7142.83 6242.32 +14.43%
Dow Jones (USA) 19762.60 17425.03 +13.42%
S&P500 (USA) 2238.83 2053.94 +9.01%
Nasdaq (USA) 5383.12 5007.41 +7.50%
BSE (India) 26626.46 26117.54 +1.95%
Nikkei (Japan) 19114.37 19033.71 +0.42%
SSE Composite(China) 3103.64 3539.18 – 12.31%