The equity markets across the world were on a tailspin from January, rattled by the US subprime crisis, but there is nothing unusual here. For the past six years, developed and emerging markets fell during the first two months of a year.
Data from Morgan Stanley Capital International (MSCI) show stock prices in all major developed markets, sans Canada, declined in the first two months of 2008. The negative returns ranged from 3.07% in Japan to 13.56% in Hong Kong.
The US and UK markets were the less affected among the developed markets, with each losing around 5.9% in the first two months of 2008. In the last six years from 2003 to 2008, it was only twice, in 2004 and 2006, where stock prices surged across the major developed markets in the first two months of the year.
In the emerging markets, stock prices fell in the first two months of 2007 in eight of the 13 major markets. Similarly, in the last six years, erosion in stock prices was evident four times in India, two times in China and several other emerging markets.
The fall in 2008 is, nevertheless, the biggest in six years. India, China and Russia saw the biggest falls compared with the previous six years. Among BRIC countries, only Brazil remained positive in the first two months, surging 7%.
Deven Choksey, managing director of KR Choksey Securities, said, ?Emerging markets are more sensitive to problems in the US as most of the markets rely on funds flowing from the US. The US markets are less hit, the emerging markets are more prone to any negative news from the US. Most of the serious money from the US starts flowing only in April (beginning of the second quarter), and so most of the market movements start only after March. The same could be the case in previous years.?
Most experts believe the fall in 2008 is unique, since it didn?t respond to corrective measures. The Fed rate cuts and infusion of money by the central banks and sovereign funds have done little to help the markets, they say.