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By Weiyi Lim, Shikhar Balwani and Michael Patterson
Feb. 27 (Bloomberg) -- The best start to a year for stocks in two decades is leaving the smallest markets behind, a sign of reduced investor confidence in the least-developed economies.
All nine of the world’s worst-performing equity indexes this year are in frontier countries, where the average stock- market value of $30 billion is about 95 percent less than in emerging nations.
While the MSCI All-Country World Index jumped 11 percent, gauges in Bangladesh and Sri Lanka sank at least 8 percent as interest rates increased. Nigeria’s stock index fell 1.1 percent after union strikes and attacks by Islamic militants. Frontier-nation stocks trade at the lowest valuations since at least 2008 versus emerging-market shares.
Falling valuations reflect concern that growth in the smallest economies, which expanded about 20 percent slower than larger developing nations on average during the past three years, won’t accelerate in 2012. Bank Julius Baer & Co. says the losses create buying opportunities for long-term investors.
In Sri Lanka, the government said it raised petroleum prices this month and will add a fuel surcharge on electricity bills. Higher fuel costs and the rupee’s tumble to the lowest level since April 2009 have stoked inflation and prompted the central bank to raise interest rates for the first time since 2007 this month.
The Colombo All-Share Index, which surged more than 200 percent in the two years after the nation’s 26-year civil war ended in May 2009, declined 8.4 percent this year. Lanka Orix Finance, a Colombo, Sri Lanka-based consumer-finance company, tumbled 30 percent.
For stocks in Sri Lanka and Bangladesh, “I wouldn’t buy them immediately, I will probably wait until the end of the year once the tightening is complete,” said Arjuna Mahendran, the Singapore-based head of Asia investment strategy at HSBC Private Bank, which oversees about $500 billion.
“Because they are small, they tend to be really volatile, a little bit of money can pump the market up very fast, and vice versa.”
Feb. 27 (Bloomberg) -- The best start to a year for stocks in two decades is leaving the smallest markets behind, a sign of reduced investor confidence in the least-developed economies.
All nine of the world’s worst-performing equity indexes this year are in frontier countries, where the average stock- market value of $30 billion is about 95 percent less than in emerging nations.
While the MSCI All-Country World Index jumped 11 percent, gauges in Bangladesh and Sri Lanka sank at least 8 percent as interest rates increased. Nigeria’s stock index fell 1.1 percent after union strikes and attacks by Islamic militants. Frontier-nation stocks trade at the lowest valuations since at least 2008 versus emerging-market shares.
Falling valuations reflect concern that growth in the smallest economies, which expanded about 20 percent slower than larger developing nations on average during the past three years, won’t accelerate in 2012. Bank Julius Baer & Co. says the losses create buying opportunities for long-term investors.
In Sri Lanka, the government said it raised petroleum prices this month and will add a fuel surcharge on electricity bills. Higher fuel costs and the rupee’s tumble to the lowest level since April 2009 have stoked inflation and prompted the central bank to raise interest rates for the first time since 2007 this month.
The Colombo All-Share Index, which surged more than 200 percent in the two years after the nation’s 26-year civil war ended in May 2009, declined 8.4 percent this year. Lanka Orix Finance, a Colombo, Sri Lanka-based consumer-finance company, tumbled 30 percent.
For stocks in Sri Lanka and Bangladesh, “I wouldn’t buy them immediately, I will probably wait until the end of the year once the tightening is complete,” said Arjuna Mahendran, the Singapore-based head of Asia investment strategy at HSBC Private Bank, which oversees about $500 billion.
“Because they are small, they tend to be really volatile, a little bit of money can pump the market up very fast, and vice versa.”
