AMFI Registered Mutual Fund Distributor | SEBI registered Investment Adviser


Share | Email Print more
Top Markets of 2009
January 5, 2010

With the conclusion of an extraordinary 2009, we look back at some of the top performing markets.

Author : iFAST Research Team

Untitled Document

If 2008 was an extraordinarily bad year for the stock markets (see “Scoreboard for Equity Markets in 2008”), the exact opposite must be said for 2009. As financial markets tethered on the edge of a total collapse in late 2008, various concerted and substantial efforts by central banks were required to prevent a total catastrophe in the global financial system. As it soon became apparent that “Great Depression Part II” was not going to happen, investor confidence rebounded, sparking a renewed appetite for risky assets. Equity markets around the world recovered with surprising strength, and markets under our coverage have risen between 12.3% and 109.5% in 2009. 

Table 1: Market Performances for 2009





JCI Index






TWSE Index


Emerging Markets

MXEF Index



SET Index


Asia ex-Japan













NDX Index


Hong Kong

HSI Index



KLCI Index



MXWD Index



SXXP Index



SPX Index



NKY Index


Source: Bloomberg; all returns exclude dividends and are in INR terms

In this year-end update, we examine the top-three performing markets for 2009 (Indonesia, India and Taiwan), as well as the main laggard Japan.

Indonesia (JCI; +109.5%)

Indonesian market was one of the worst-hit markets in 2008, losing 48% (in INR terms). In contrast, 2009 was an extremely fruitful year for investors who invested into the Indonesian market.

Indonesia is one of the few countries which avoided a single quarter of year-on-year contraction in economic growth in 2009, thanks to its strong domestic demand and low dependence on exports. Domestic demand accounted for more than 50% of GDP while exports were about 30%. This has allowed Indonesia to score GDP growth in a range of between 4.04% and 4.45% during the first three quarters of 2009, slightly lower than the average historical growth rate of 5.2% (from 2000 to 2008). In addition, the relatively stable political condition in 2009 as compared to its turbulent past has also helped in boosting foreign investment participation in the country.

Standard & Poor’s Credit Research had revised the credit rating for Indonesia from stable to positive in October 2009. The upgrade is based on the supportive private consumption and policy continuity after Yudnhoyono won the presidency election. The country has been able to maintain disciplined fiscal management since Yudhoyono assumed office in 2004.

Current economic conditions are improving. Exports in October increased by 10.1% year-on-year as opposed to a 19.8% contraction in September, on the back of positive growth in non-oil and gas exports. Bank Indonesia anticipates higher but controllable inflation of between 4 to 6% in 2010 and 2011, higher than 2009’s range of 3.5 to 4.5%.

Consensus earnings growth for Indonesian equities are at 19.8% and 15.9% for 2010 and 2011 respectively. Estimated PEs for the Indonesia equity market are at 13.4X and 11.2X for 2010 and 2011 respectively (as at 30 December 2009). These valuations are attractive, compared to the historical range of 10.4 - 22.9X between 2003 and 2007 but a consideration of relatively high Indonesian government bond yields means that we are reluctant to raise the rating higher from our current 3.5 star “attractive” rating.  

India (SENSEX; +81.0%)

Like Indonesia, India’s equity market (as represented by the SENSEX) was one of the worst performers for 2008 but in 2009, the SENSEX has rebounded strongly to become the second best performing market under our coverage. In 2008, there was a net foreign outflow of US$11.97 billion from the Indian equity markets but for 2009 has seen a net inflow of US$17.1 billion, close to the all-time-high of US$ 17.7 billion achieved in 2007.

Various factors have contributed to the phenomenal performance of the Indian market in 2009. Much like top performer Indonesia, India has been one of the very few economies in the world to emerge from the financial crisis relatively unscathed. Industrial production growth is back to levels seen before the financial crisis, averaging 7% between April and October 2009.  The same trend has been seen for India’s GDP, with growth for H1 2009-10 at 7%. The planning commission expects the GDP for FY2009-10 to grow by over 7%.

The fiscal stimulus, excise duty and key policy rate cuts that were given out by the government and the central bank during the 3rd and 4th quarters of FY 2008-09 have also served to boost consumption. The 2009 election results saw the formation of a stable government led by the Congress party. This meant that the much needed political stability was at hand in a country which had seen a lot of promising reforms blocked by warring allies of the previous government. The corporate sector was buoyed by the prospect of a definite and progressive course for economic reforms, leading to the market rising over 17% in a single day after the election results were announced.

The Indian equity market’s estimated PE for FY2010 (ended March 2011) and FY2011 (ended March 2012) are 16.1X and 13.6X respectively (as of 30 December 2009). Much like Indonesia, high government bond yields are an important consideration in the relative attractiveness of the equity market. We have a 3.5 star “attractive” rating on the Indian equity market.

Taiwan (TWSE; +74.9%)

As represented by TWSE Index, Taiwan’s equity market gained 74.9% in INR terms in 2009. A sharp decline in exports significantly hurt the island’s economy, but the China-led global recovery and the closer cross-strait relationship eventually lifted Taiwan out of the worst recession in 60 years. The equity market bounced back sharply and to become the third best performing market under our coverage.

In the Asia ex-Japan region, Taiwan is the market that has received the largest positive re-rating by investors. The market was over-pessimistic due to the poor economic outlook, followed by alarmingly poor economic figures in the first quarter. 1Q 09 GDP declined by 11.3% year-on-year, while exports tumbled by 44.1% in January. Moreover, the market initially expected 2009 corporate earnings to drop by 60% in March. Since then, the earnings expectations have been revised up continuously and are now expected to grow by 24%, thanks to the robust demand from China-led emerging markets.

The semiconductor sector is the main beneficiary in the wave of re-ratings. For instance, the 2009 and 2010 earnings forecast of Taiwan Semiconductor Corporation, the world’s largest custom chipmaker have revised up by 268% and 77% respectively from their lows. Moreover, the tighter cross-strait collaboration moved a step forward after the MOU signing. Banks and insurance companies which have long been stifled by sluggish growth have benefited by gaining access to the fast-growing financial markets in mainland China.

In 4Q 09, major economic indicators showed sign reversals into positive territory. We also expect double-digit growth in the first quarter of 2010 due to the low-base effect and more growth momentum. Consensus earnings in 2009 have already surpassed our revised estimates made in August 2009 and are expected to rise by 24% (as of 29 December 2009). Our estimated earnings growth in 2010 and 2011 are 56.3% and 17.2% respectively. It is noteworthy that the earnings growth of Taiwan is the largest in the Asia ex-Japan region. Therefore, we have upgraded the Taiwan market from 3 stars to 4 stars – very attractive, under a three-year horizon.

Japan (Nikkei 225; 12.3%)

Japan’s equity market, as represented by the Nikkei 225 index, returned 12.3% in 2009. As the worst-performing market under our coverage, the market’s gains were also impacted by the depreciation of the Japanese yen against other major currencies.

Japan’s economy expanded 1.2% quarter-on-quarter, equivalent to an annualised rise of 4.8% in the third quarter of 2009. It was the fastest growth in over two years (and also among the developed economies), supporting the view that a recovery in Japan’s economy is in sight. However, investors are concerned that deflationary pressures could drag down domestic demand in the coming quarters, especially when the effects of fiscal stimulus is receding. Japan has already entered into a deflationary state. The country’s core national CPI dropped 2.5% year-on-year in October 2009, a record sixth straight month of deflation. It was also the steepest decline since comparable data became available from 1971.

The Japanese Yen gained 3.6% against the US dollar in the second half of 2009. A strong Yen could exacerbate deflation by making imports cheaper. Sustained price declines will threaten to curtail corporate earnings growth, which has already been insufficient impetus to spur Japanese stock prices this year.

Due to the low earnings base caused by the plunge in profitability in 2008, earnings growth in 2009 is expected to rise drastically. However, the magnitude of the earnings revisions in Japanese companies has been small as compared to other Asian markets. Earnings in 2010 and 2011 are estimated to rise 82.8% and 26.2% respectively, as at 30 December 2009. While other countries have seen significant upwards revisions in earnings growth, Nikkei 225 earnings have been revised downward. We maintain an “attractive” rating of 3 stars on the Japanese market.

A dull 2010?

Investors who have been following financial markets closely over the past two years would have had more than their fair share of thrills and spills. One of the worst bear markets in recent memory coupled with numerous corporate failures and financial panic left many investors with queasy stomachs. Those who sold out near the bottom (at a considerable loss) are now dealt a second blow, as equity markets rallied strongly from their lows.

On the back of these two tumultuous years, it will take much for 2010 to match the excitement and it is likely that 2010 will appear incredibly dull in comparison, a welcome breather for investors who have been part of these exciting times. We look forward to 2010, a year of repair and renewed growth for most economies, and maintain our belief that stock markets have further gains to impart to investors.


iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.


Comments (0) | Comment on this Article
 (Click on Comments/Comment on this Article to show or hide comments/post a comment)
Recommended Funds
Recommended Portfolios
Chart Centre
Risk Profiler