Never before have so many markets across the world advanced simultaneously and to so many record highs. Mexican stocks and Sao Paulo's Bovespa index finished with a flourish on December 30th, scoring their fourth record close in as many days, identically to Britain's FTSE 100 index (also four consecutive record highs).

Germany's DAX run of new highs was even longer as it ended with its 11th record close in the past 12 sessions. Not to be left behind, the French CAC recorded its 38th record close of the year. In the US and in Canada, the Dow Jones as well as the Toronto Stock exchange continued their record-breaking sprees on millennium eve. Even Japan's Nikkei, Singapore's Straits Times index and Hongkong's Hangseng were buoyed by the world-wide euphoria. They both closed 1999 at their highest levels for the year.

Closer home, the Sensex closed above 5000, a few per cent away from its all-time high. In Moscow, Boris Yeltsin's surprise resignation sent the Russian trading system index soaring to its highest close in 18 months. As January 1 has dawned, the markets have been proven right once again. There have been no reports of any computer glitches. Analysts now say that another surge is imminent when trading begins anew on January 3, 2000. No doubt 1999 has been led by technology and valuations in that sector have blown away all traditional models of valuation.

In the last two months, the technology-heavy US Nasdaq index has shot up 33 per cent to 4,000. Of its components, while technology stocks increased by 47 per cent, the others increased only by 10 per cent. It would, however, be erroneous to attribute the increase in stockmarket indices across the world to software and Internet alone. Excluding the last few months, industrials and cyclicals, FMCG and pharma have all contributed to and participated in the rise.

It is possible to identify a few possible reasons for the current attractiveness of stocks. There is of course the "new economy" model, based on the Internet and a new paradigm for doing business. Then, there is excess global liquidity chasing financial assets. With increasing possibilities of higher interest rates in the US and Europe, bonds are no longer looking as attractive and money is moving into stocks. Finally, the prospects for the global economy have indeed improved during 1999. Some of the earlier key concerns, such as SE Asia and Russia, are no longer of worry. On the other hand, there is a clear recovery underway in Latin America and in Asia. There may be country-specific problems but these are not expected to have a widespread impact.

Global growth is therefore expected to rise above the long-term average, without a serious threat of inflation. It will be driven by a recovery in Japan and rapid gains in the Euro area-, both of which have passed their low point. They have benefited from policy stimulus, low real interest rates and an undervalued currency for the Euro and massive public spending in Japan.If there is any moderation in demand in the US following a tightening of monetary conditions by the Federal Reserve, these two economies should be in position to take up the slack.

The emerging world too has become less volatile and less susceptible to damaging contagion, reflecting th stabilisation of domestic prices, the improvement on current account and the restoration of official reserves. While the strong yen and Japanese recovery will sustain Asia, Eastern Europe will benefit from the Euro-area rebound. Restoration of investor-risk appetite for emerging markets after the crisis in 1997 should also help finance growth in these economies. There continue to be some risks to this outlook. The widely-debated imbalances in the US economy, from the huge current account deficit to a tight labour market and a negative savings rate may burst the US bubble.

China too, which depends to a large extent on a huge public investment programme to keep its growth rate high, could falter. However recent trends indicate the both risks have diminished significantly in the last quarter of 1999!

(The author is head- treasury marketing for a leading foreign bank. The views expressed are his own.)