Which asset classes performed best in 2016?
By , 19 Dec 16
2016 has been a remarkable year. The two best performing large equity markets this year are countries that have been mired in recession for years. At the same time, the stock market of the world’s fastest growing large economy has been delivering some of the lowest returns.
Though it has gone through periods of elevated volatility this year, the MSCI Emerging Markets Index has returned almost 16% overall: its best annual performance since 2010. So investors who managed to hold their nerve have been rewarded.
The asset class has been the most popular with European investors this year. According to Morningstar data, emerging market equities saw cumulative net inflows in excess of €14.2bn in the first 10 months of the year.
The popularity is also testified by Expert Investor investment sentiment data: those planning to increase their allocation to emerging market equities have outnumbered those intending to decrease exposure by an ever growing margin as the year progressed.
The EM revival was led by commodity exporters such as Brazil and Russia, but Asian markets have also done relatively well. India, however, was a dissonant. The country was one of the best performers in emerging markets in 2015, but has posted a measly return of just 2.8% in euro terms year-to-date.
This is remarkable, since GDP growth in 2016 is forecasted to be around 7.6%, the highest of all major economies. Moreover, the Indian economy is set to grow at even faster pace in 2017 and 2018, according to the IMF. But perhaps this economic growth had already been priced in by investors.
The announcement of central bank governor Rajan in June that he would step down perhaps mattered more to investors. Since September, when he was replaced, the Indian equity market has lagged its Asian peers considerably.