Tuesday, April 28, 2015

Best performing asset classes of 2012: Equity or currency?

Here is a quick look:

Equities: The kind of fund flows amounting to USD 23.5 billion makes the Nifty as an outperformer. In absolute terms of rupee Nifty has moved 27-28 percent (in 2012) and 22 percent in dollar terms. That is seconded by MSCI Asia Ex-Japan which has gained about 21 percent. This is not a year of divergence where emerging markets have outperformed and developed markets have been behind. As you can see the Nikkei has been on the radar for the last few sessions because of the Bank of Japan (BOJ) easing prospects, but on 2012 basis in terms of dollars Nikkei is up only 7 percent.

Currencies: The USD-JPY has given a return of 10 percent. So that is something you need to factor in. In terms of the Euro-Dollar we have seen a marginal gain, it is just about 1.5 percent. The Dollar Index has actually slipped about 0.5 percent or largely in flat territory, but USDINR after a huge move last year seen another weakening of about 4 percent this time around.

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Bond Markets: Aside of equities if there was potential in something giving you very good returns; it was those high risk bond markets which actually gave you a lot of rally. ML High Yield Bonds are giving 19 percent, that gives even developing market (DM) equities a run for money. Next up is German 10 year bond that is 8.5 percent and the Spanish 10 year bonds despite all the concerns are giving an 8 percent returns. In comparison the US bond market gave a 4 percent return whereas the Japanese 10 year bond for obvious reasons is giving a negative return of about 5.5 percent.

Commodities: Commodities have been in focus but it has been a slightly range bound year. The CRB Index itself is down 4 percent because of soft commodities this time around. This time gold is still up 6 percent despite all the fall in terms of dollars, although it has broken down on the range. Copper is up 3 percent while Brent Crude very flat, up just 1 percent at this point.

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