Emerging markets bounce back

The Global Emerging Markets sector benefited from investors returning to riskier assets in March. Having languished at the bottom of the table for much of early 2010, the average fund is now up 9.35% for the year to date.

Eastern Europe bounced back from a difficult month in February, as the Greek situation started to resolve itself. The MSCI Emerging Markets Europe index was up 9.67% for the month with a particularly strong performance from the Turkish, Polish and Hungarian markets. The Czech Republic remained weak and rose just 1.11% over the month.

For their part, the Russian markets benefited from a strong tick-up in the oil price towards the end of the month with the MSCI Russia index rising 8.56%. Andrei Klepach, the country’s deputy minister for economic development, said the Russian economy may grow faster than official estimates in 2010 and added that the current predictions of 3% to 3.5% were ‘conservative’ and real growth was likely to be nearer 4% to 4.5%.

In East Asia, a World Bank report said output, exports and employment had returned to pre-crisis levels and, again, China has been the engine of growth. Real GDP in developing East Asia is predicted to rise 8.7% in 2010, from 7% in 2009. The report said stimulus measures were also being withdrawn in the region, but private consumption had not yet emerged to take the strain.

The FTSE Xinhua index rose 3.8% over the month – significantly behind the developed market indices. The Hang Seng’s rise was also muted, at just 1.9%, while the index of Chinese listed shares – the Shanghai 180 – rose 2.5%.

Brazil’s Bovespa index resumed its strong run, rising 5.8% over the month. The country’s economy grew 2% in the last quarter, showing its growth rate is accelerating. IMG, one of the world’s largest sports and entertainment marketing groups, endorsed Brazil’s growth potential by announcing a joint venture with Globo, the country’s largest television network. The group has already made a successful push into India and is planning a China venture as well.

India’s S&P/CNX 500 index rose 3.4% over the month while Standard & Poor’s lifted its negative outlook on the country’s sovereign credit rating. The rating agency said it was encouraged by a promise from Pranab Mukherjee, India’s finance minister, that the central and state government deficit would fall from 9.8% of GDP for the year to March 2010 to 8.3% next year and 5.4% by 2015. The group also revised its prediction for India’s 2010 GDP growth rate up to 8%.

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