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Friday, Jan 07, 2005

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The `peak' year for emerging markets

K.S. Badri Narayanan

Chennai , Jan. 6

THE year 2004 clearly belonged to emerging markets. Benchmark indices in Asia and East Europe and South America outperformed most of the developed markets handsomely. And in the process, most of them peaked to lifetime highs.

India figures in this list that includes Brazil, Mexico, Indonesia and Argentina.

The reasons attributed to this performance are a weak dollar, pick-up in economic activity, a strong commodity market - the natural resources or strength for many developing countries - and an increase in outsourcing of jobs from developed nations.

Apart from these countries, indices in developed nations such as Australia, Austria and New Zealand also saw their historic peaks during 2004.

According to Mr Gul Teckchandani, Chief Investment Officer, Sun F&C, the emerging markets are benefiting as the investments in the US are not happening due to weak currency and growth in the US economy is not picking up as expected. So, investments are flowing into emerging markets.

Overall, the Austrian benchmark ATX Index was the best performer during 2004, returning about 57 per cent, followed by Hungary (55 per cent) and Mexico (48 per cent).

Indonesia, Sri Lanka and Pakistan were the best performers in the Asian region.

In comparison, the US benchmarks - Dow Jones Industrial Average, S&P-500 and Nasdaq - returned 3.6 per cent, 9.1 per cent and 8.6 per cent respectively.

All the three benchmarks touched their highest level since 2001 during the last week of 2004.

Among European majors, Germany's Dax posted a return of 7.33 per cent, France's CAC 7.55 per cent and the UK's FTSE, 7.7 per cent.

In Asia, majors such as Japan's Nikkei & Hong Kong's Hang Seng gave a return of 7.6 per cent and 12.6 per cent respectively.

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