As we head into the second quarter, we take a closer look at some of the top-performing markets for the first quarter of this year, as well as those on the bottom of the performance table, identifying some of the key reasons for their performances and providing our outlook for each market.
1Q 16 started the new year off on the wrong foot, with financial markets around the world posting hefty declines that saw many indices entering ‘correction’ and ‘bear market’ territory as the sell-down ensured 2016 was the worst start to a year seen in just 10 trading days.
Subsequent to the initial wave of selling seen in January and the first half of February, financial markets managed to find their footing and stabilised from the second half of February to end the quarter with significantly reduced losses.
The dominant theme in 1Q 16 centred on fears of a global slowdown, the efficacy of monetary policy and potential negative effects of negative interest rates (triggered by the Bank of Japan’s foray into negative rates), concerns over European banks and the low commodity prices/threat of deflation, as well as issues from China.
While negativity permeated the financial markets in the opening few weeks, central bank policy changes together with relatively positive economic data saw some of the fears abate and markets rebounded sharply.
As we head into the second quarter, we take a closer look at some of the top-performing markets for the first quarter of this year (Brazil, Russia and Thailand) identifying some of the key reasons for their performances and providing our outlook for each market.
Brazil
The Brazilian equity market was sent into a frenzied rally, with the benchmark Bovespa Index surging 15.3% in MYR terms over 1Q 16 to top the list of equity markets under our coverage as speculation over President Dilma Rousseff’s ouster gained momentum.
Given their heavy weightage in the Bovespa Index, local banks Banco Bradesco SA and Itau Unibanco Holding SA delivered the largest contribution to the index’s stellar performance, with their preference share prices staging a spectacular rally by 42.3 and 20.9 per cent respectively in 1Q16.
The beleaguered Petrobras, which was at the centre of a sprawling corruption scandal in 2014 that sent shockwaves through the Brazilian economy, also attracted substantial investor interest over the course of the quarter, with its preference rising 24.4 per cent respectively.
Russia
Russian equities, represented by the RTSI DOllar index, posted a 4.1 gain in ringgit terms over the first quarter of 2016, landing near the top of the performance ladder this time round.
In local currency terms, the index posted a 15.7 per cent gain over the quarter, as the ruble rebounded and strengthened against many currencies from its lows seen in early-January.
This rebound in performance has come on the back of a return of risk-appetite in equity markets worldwide, as well as a rebound in crude oil prices from mid-January.
In 1Q 16, energy companies like Rosneft, Bashneft, Surgutneftegas, Lukoil and Gazprom saw gains in their share prices, while companies like Russian airliner Aeroflot, as well as Novolipetsk Steel and Severstal were the top performing stocks over the quarter.
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