MSE | Wednesday, 09 January 2008

The good, the bad and the ugly

World Markets and Fund report weekly round up to 8th January 2008

And the winner of the best performing stock market in 2007 goes to… Zimbabwe. This troubled African state would appear to totally encapsulate today’s headline, albeit not just for investment reasons. Their astounding 322,111% record stock market gain in 2007 is somewhat undermined by the country’s estimated 24,000% annual inflation rate and with a despotic dictator in power and a male life expectancy of just 37, sadly most Zimbabwean investors won’t live long enough to enjoy their profits! In investment terms, 2007 will be remembered for the good, the bad and the downright ugly. This rollercoaster year was initially fuelled by a takeover bonanza which saw the UK FTSE 100 reach a seven-and-a-half year high in June while the US Dow Jones also hit new record highs, breaking through the 14,000 level for the first time ever however, their second half performance of 2007 was dragged down by the nasty sub-prime fiasco.
But it was another good year for the Chinese. The Asian giant’s main Shanghai Composite Index enjoyed an incredible 97% increase having recovering from a few blips along the way such as February’s one day fall of 8.8%, making it the best performing major benchmark index of the year. Other major winners included Jakarta’s JSX index, up by over 52%, India’s Bombay Stock Exchange gained 47% and Hong Kong’s ‘Hang Seng’ achieving a very healthy 39.3%. The pick of the best performing individual shares clearly indicates the sectors which did well. The China Mobile share price rose by 92.5%, Nokia increased 77%, mining firm BHP Billiton increased by over 66% while oil producer Exxon’s share price rose by 16.7%.
Gold also began to shine again in 2007 ending the year at $833.20 per troy ounce, representing a gain of almost a 31% for the year and of course oil hit new record highs and increased by 57% over the 12 month period, in fact most commodities had a good year.
Although not absolutely disastrous, 2007 must go down as a bad year for both the New York and London stock exchanges with the Dow Jones recording a modest 6% gain and the FTSE 100 finishing up a tame 3.8%, a long way off the double-digit returns from each of the previous 4 years while investors in the Japanese Nikkei 225 suffered the worst performance of all the major markets as it fell by 11%.
Investors in one of the world’s largest banking groups saw their Citigroup shares turn ugly recording a loss of over 47% in the aftermath of the credit crunch while shares in American home building company, Beazer Homes USA, fell down by 84% as house prices tumbled across the world’s largest economy.
While the world markets were volatile in 2007 it was amazing just how resilient they were in the face of the biggest banking and finance market mess in living memory and as much as I am sure we all crave huge investment returns would any of us really want to change places with a resident of the country with the world’s best performing stock market of last year?