- •Contact us
- •About us
- •Advertise with the FT
- •Terms & conditions
© The Financial Times Ltd 2013 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Markets aren’t known for their patriotic fervour. Populated by cynics and motivated by money, there is little reason to expect local markets to support their national governments – particularly in the eurozone, where the response by the wealthy in crisis-hit countries has been to ship their cash to Germany or the UK.
But hang on! Perhaps brokers are more patriotic than popularly thought: it turns out that analysts tend to recommend shares in companies from their countries.
A nice piece of work by Charles de Boissezon at Société Générale‘s global equity engineering and advisory unit looked at broker recommendations on German and Spanish blue-chips, the two markets tending to be reasonably domestically-exposed.
Not surprisingly there are more buy recommendations on German than Spanish shares, and more sells on Spanish.
But the breakdown is revealing: analysts at German brokers are much more positive about German companies than analysts working for Spanish brokers, and vice-versa:
Cyprus has finally struck a €10bn deal to become the fifth country “rescued” by the rest of the eurozone, after Greece, Ireland, Portugal and a special loan for Spain. Almost a third of the 17 countries in the single currency have now had to be rescued.
The European Central Bank – like the Bank of England – has decided against an immediate further loosening of monetary policy, but Mario Draghi, president, says some ECB policymakers favour cutting interest rates. Ralph Atkins, the FT’s capital markets editor, argues that with small businesses in the eurozone’s south facing a severe credit crunch and the stronger euro hitting eurozone exports, further action from the ECB may soon prove inevitable.
Today sees the publication of Credit Suisse’s annual Global Investment Returns Yearbook, a mammoth piece of research into global long-run returns overseen by the London Business School academics Elroy Dimson, Paul Marsh and Mike Staunton. It is an invaluable resource, and this blog is likely to mine its contents for some days to come.
Revisions for this year help ram home one quick and spectacular lesson from history. Baron Nathan Rothschild is widely believed (wrongly, according to historian Niall Ferguson) to have said that you should “buy when there’s blood in the streets”.
Much of the time this advice works. Buying into Japan or Germany after the second world war would have worked out extremely well, and the greatest buying opportunities almost by definition come when it seems almost mad to buy.
But the aphorism is not infallible. This year, the academics tried to address their concern that their global stock market index suffered from “survivorship bias”. So they have recalculated them including three new countries that were not previously covered in their attempts to calculated the global equity risk premium: China, Russia and Austria. Adding these nations hugely changes the perception of long-term risk.
Let’s start in Russia. Any bold contrarians who decided in the late 19th century to bet on Tsarist Russia to outperform the US for the long-term, and held on even during the great political unrest of the attempted revolution of 1905, would for a long time have looked very clever.
The chart compares the St Petersburg stock exchange’s composite index performance with that of New York. After 1917, of course, the value of any equity investment in Russia was wiped out. This might appear to be an exceptional example. But it is not. China also had a revolution that led to the closing down of its stock market (and of capitalism for a while), and that happened within living memory. On the eve of the second world war, China’s returns looked very healthy. With the arrival of Mao, shares went to zero (and international investors have had a rough ride even since Chinese stock markets reopened).
Using the MSCI China index, covering stocks available to international investors, those who bought in 1993 have actually lost money. But Chinese stock markets have been recovering recently. And, deliciously for those who like historical ironies, the Shanghai Composite, the main domestic index, bottomed last year at 1949, the year of the revolution. Read more
Calm in the eurozone has come at a cost to the havens. James Mackintosh, investment editor, points to the sliding Swiss franc and sterling, and warns the premier haven of choice, London property, could be next.
The parade of best bourses so far this year is a rogue’s gallery of the past few years’ basket cases: Greece, Dubai, Egypt and Argentina, with the eurozone periphery close behind. James Mackintosh, investment editor, analyses whether this dash for trash is wise.
The valuation gap between European and US shares has narrowed to levels only seen a few times in the past decade. Is this justified? James Mackintosh, investment editor, says this suggests investors see a safer Europe while America’s economy turns European. Read more
There are signs of green shoots in the Greek current account, recording a September surplus for the first time since it joined the euro. But James Mackintosh, investment editor, worries that Greece is getting the wrong sort of rebalancing Read more
If you only know one thing about European summits, it should be this: agreements aren’t worth the paper they’re written on. The fact something has been publicly announced, even written down in 4am post-summit communiques, means nothing.
Yet another European summit has been discussing yet another urgent issue, and yet again it is one that was supposed to have been agreed at a previous summit: banking union. The wrangling this time extends as far as the question of whether what was previously agreed is even legal.
|About this blog||Blog guide|