Developed equity markets are in the 6th year of a robust upward move. The MSCI Developed World Index rose by almost 18% per annum over the period (Mar 2009-June 2015) in Euro-terms. However, momentum has stalled in recent months. Stepan Mikolasek, new head of equity management of Erste Asset Management, names the main reasons: surprisingly weak US economic growth in the first quarter, concerns about China’s economy, the fear of a Fed rate hike and growing risk related to the Greek situation.
The longest eleventh hour in recent history is drawing to a close. However, while the negotiations earlier this week seem to have narrowed the gap between Greece and its creditors, a final deal has not emerged yet.
Based on earnings expectations emerging markets equities are currently valued 27% below the price/earnings ratio of developed markets equities. The long term average of this discount is 19%. Closing the gap is a question whether the confidence of the markets in the earnings expectations is solid enough to facilitate a re-(e)valuation.
Environment and sustainability are gaining more and more importance in today´s society. In this interview about his special fund, Clemens Klein reveals why solar stocks are interesting in particular.
In Turkey, the impact of the currency fluctuations are being discussed and even an ordinary Turk on the street knows what it means for the currency to depreciate. For example, during a cab ride, you may have a very deep economic discussion with the taxi driver about the dollar and the Turkish lira. This is as a result of the crises Turks experienced in the past – unfortunately there was more than one! This in turn, has enabled Turks to have their guard up automatically to cope with the strong dollar and there is a dollar investment mechanism in every household immediately if they get a whiff of the depreciating Turkish lira. Corporates also got used to foreign currency fluctuations, but as an import and export oriented country, the depreciating lira has some negative implications on the corporates as well as economic indicators.
After quite a stable period the Turkish lira has started depreciating against the dollar since the final months of 2014 due to a combination of: i) President Recep Tayyip Erdogan’s comments regarding the Central Bank of Turkey, ii) the ECB’s quantitative easing program, iii) woes about Greece’s exit from the EU and iv) the FED’s rate hike expectations.
The US central bank, the Fed, is very likely – almost 90%, according to Fed funds futures – to raise the Fed funds rate this year. The expected rate hike has been one of the dominating topics on the financial markets for a year. The bursting of a mega bubble, rising pressure on fragile emerging markets, and the end of years of a share market rally in the USA are the most commonly mentioned worries in this context. None of which is overly far fetched, as we have indeed seen all of these scenarios before. Still – history prompts the conclusion that there is no need to panic, at least not when it comes to equities.
The share price performance in emerging Europe, i.e. Poland, the Czech Republic, Hungary, Russia, Turkey, and since most recently again, Greece, has not been overwhelming in the past years. Since the middle of 2011 the MSCI Emerging Europe, the most important index for the region, had been locked into a sideways movement, which was topped off by a correction at the end of 2014 as a result of the ongoing political crises. Along with (geo-) political factors, the weakening of the economic dynamics and a lack of reforms had been causing a subdued price performance.