The Hindu Business Line : Russia, South Korea sizzle

MOST equity markets world over ended 2005 on a positive note. Emerging markets led by Russia, South Korea, South Asian twins — India and Pakistan — Austria and South Africa were in the forefront, as their indices scaled new highs. The Russian Traded Index gained a whopping 61.8 per cent; South Korea and Pakistan posted a return of 54 per cent.

While several other markets sizzled, the US equity markets yawned. Even as there were pulls and pressures from a slew of positive and negative news, the US markets were unable to find a clear direction. While firm crude prices, a weakening dollar and soaring home prices played spoil-sport, a surging economy and low unemployment data acted as a shield.

Further, speculation over whether or not the US high priest of finance, Mr Alan Greenspan, would indulge in `measured' rate increases also kept the market players guessing most of the time. Also a mixed trend from companies (ExxonMobil gained on the back of firm crude prices, Hewlett-Packard moved up after the IT major replaced its chief executive and General Motors dwindled to a 23-year low on worries about its market share, healthcare costs and profitability) offered little clarity for the market. The S&P-500 gained 3 per cent and Nasdaq rose 1.4 per cent.

For the Euro zone, the more-than-expected profit growth of corporate majors combined with a boom in mergers and acquisitions supported equities. Mining shares such as Rio Tinto and BHP Billiton rose on the back of firm copper and iron ore prices. Gold rose to around $516 an ounce, having rallied about 20 per cent this year. Britain's FTSE 100 rose 16.7 per cent, France's CAC-40 23.8 per cent and the German Xtera-Dax 27.1 per cent.

Hopes are that Japan will soon shake off years of deflation that helped the Nikkei surge 40.2 per cent (and close to 50 per cent from year's low levels), its biggest gain since 1986. Buoyed by blue-chip IT stocks, the Korea Composite Stock Price Index or Kospi hit a record high 1,379.37.

Pakistan's liberalised economy and its integration with global market boosted its benchmark KSE-100 to a new high above the 10-K mark. A surge in economy, coupled with foreign institutional investors' confidence (not only from traditional West but also from the East) pushed up the BSE Sensex and the NSE's Nifty to all-time highs.

Sri Lanka Colombo All Share Index, which also witnessed sprinkling space in 2005, succumbed to the terrorist activities during the fag end of the year though it finished the year with a gain of 27 per cent.

Paradox: Despite being the key driver of global economic growth, Chinese stock markets tumbled during 2005. Many attribute the decline to the `overhang' problem. About 65 per cent of all the shares of companies listed were `temporarily non-tradable'. There were several indications that these shares would be freed up for listing. The fear of these non-tradable shares flooding the market once the restrictions were removed appeared to depress sentiment.

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