May 25, 2024

Markets Overview

The global risk appetite is determined not to take a summer vacation. Data released on the economic front do not support the bull market. But investors don’t care. The fact that Europe has started to take steps in the right direction to solve its debt crisis and the confidence that the US Federal Reserve will draw the additional quantitative easing (QE3) weapon against the recession risk maintains the risk appetite.

 

Data released in Europe and the USA point to a developed world caught between recession and growth. PMI data for September decreased slightly compared to the previous month with 45.1, showing that Europe will remain in recession. The US manufacturing industry PMI is expected to come in at around 50 and pull growth below 2%.

The risk perception regarding the European debt crisis continues to improve. With the expectation that the European Central Bank will start buying, the rise in banking shares and the stock market in general, starting from the debt markets of Spain and Italy, continues. The European Central Bank has not yet made a concrete statement that it will make additional monetary easing and start buying bonds. But investors continue to buy expectations ahead of the meeting to be held on September 6th.

 

MSCI Eurozone index yielded 6.4% in August and 15.4% in the last three months, thanks to the purchases of investors who trust that systemically important Spain and Italy will not be allowed to fail. Although Wall Street slowed down a bit under the shadow of the financial measures that will come into effect automatically at the end of the year, it increased by 2.1% compared to the beginning of the month and by 7.2% in the last three months.

Developing country stock markets continued to lag behind developed countries with a return of -0.5% in August, 4.5% in the last three months. The recession in developed countries inevitably brings a slowdown in developing economies that grow with exports to these countries. This slowdown is felt more strongly in the BRIC countries (Brazil, Russia, India and China), which are sensitive to global growth.

China’s August PMI data fell to 49.2, the lowest level in the last 9 months. The market expectation was that the PMI data would remain at the same level as 50.1 in July. The fact that export orders remained at 46.6 for the second month in a row indicates that the lack of foreign demand will continue to hinder the growth of the Chinese economy.

The figures announced show that the slowdown in the Chinese economy will be more severe than anticipated. When China announced its 2012 growth target of 7.5%, most experts argued that the government had set the target particularly low to keep expectations low. The first eight months of data show that the probability of growth falling below target is increasing.

Turkish stocks continue to be the surprise of 2012. MSCI Turkey index increased by 35.7% compared to the beginning of the year and became the most profitable stock market among developing countries after Egypt (48.4%). Since the beginning of June, when we gave the recommendation of “COLLECTION”, the return of the stock market has been 27.5% in dollar terms.

Thanks to the measures taken last year, a “soft landing” that reduced the imbalance between domestic and foreign demand in the economy, turned inflation down and started the normalization in monetary policy was effective in the ISE’s outstanding performance.

Turkey’s low sensitivity to the slowdown in global growth also supported this process. The slowdown in global growth negatively affected the export champions of Asia, especially China, and countries such as Brazil and Australia that sell commodities to these countries. Turkey has succeeded in distinguishing itself from developing countries with its growth based on domestic demand and external resources.

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