Disastrous end to 2000

Reshma Krishnan

IT WAS a fitting end to a bad year.

December saw a disaster with more than half the world's major stock market indices continuing to be in the red. The US election imbroglio was finally sorted out with Mr George W. Bush emerging as the President-elect -- without much of a positive effect on the bourses worldwide. The month is, normally, flat for most major bourses with the holiday spirit in the air and positions being consolidated.

The best performer of the month was the Brazilian Bovespa, followed closely by the star performer of 2000, the Chinese Shenzen B. Bovespa registered a positive return of 14.8 per cent to close December at 15,259.20 from the November close of 13,287. This could have been a result of the rise in the Brazilian Real, consequent to an increase in foreign investment inflows into the country, as foreign firms seemed to be on an agenda to acquire local firms.

The Shenzen B -- the market for foreign investors -- was the runner up in December. It posted a return of 11.2 per cent to close December at 938.56 from the November close of 843.76. The index also posted the best returns for 2000, rising 67 per cent in value. It was perhaps one market that did not feel the Nasdaq's adverse effects.

The Hang Seng managed to buck the trend and posted a positive return of 7.9 per cent to close December at 15,095 from the November close of 13948.

Unlike the Hang Seng, other Asian indices had a different story to tell. The year 2000 was pretty bad for them. Each market had its own share of political and financial turmoils that effected their performance. Moreover, each of them had to deal with the spill-over effects of the Nasdaq every time it decided to crash or correct itself. Therefore, in the midst of the Estradas, the Suhartos and Japanese bankruptcies, these indices saw a rough end to the year.

The Nikkei continued to fall in December losing around six per cent and posted one of the worst returns for the month. The Nikkei fell 27.19 per cent in 2000, which could be its worst return in a decade. It has been the casualty of the sharp downtrend in technology stocks, worldwide. This was accompanied by investors' fears about the sluggish trend of the domestic economy's recovery. The index closed December at 13,785.69, down 5.9 per cent, from the November close of 14,648.51.

The technology index -- Nasdaq -- was one of the major losers in December. It lost almost five per cent, posting negative returns to close the month at 2,470.52 from the November close of 2,597.93. It also posted one of the worst returns for 2000, losing almost 40 per cent. This has been its worst performance in history. One of the reasons for its fall in December was the dreaded `r' word -- recession. Investors spent the year worrying that the US economy was growing at too fast a pace. In addition to this, fears of a big slowdown affected them.

Nevertheless, the other two US indices -- Dow Jones Industrial Average and the S&P index -- managed to ride over the economic and political turmoil to end the month positively. The DJIA closed the month up 3.6 per cent at 10,786.85. The S&P 500 Index -- the one that looks at sectors across the board, and the better indicator of the economy -- also closed marginally up 0.4 per cent to end December at 1,320.28.

January 2001 has begun on a sour note with the market unnerved by news that the US economy is slowing down. The Federal Reserve has just cut interest rates, and while the bourses have responded positively to this move, it is still uncertain which direction the markets will take in the new millennium.