Emerging and frontier markets continue darling run

Global equity markets significantly underperformed emerging and frontier markets in 2010, evidenced by MSCI Indices end of  year data, with some emerging markets returning as much as 50 per cent and some frontier markest returning 70 per cent for the year.While overall global equity markets continued to recover, the MSCI data demonstrated that emerging and frontier markets recovered more strongly than developed markets in 2010.

The MSCI Thailand and MSCI Peru indices were the strongest performers among the emerging markets, posting returns of 49.9 per cent and 47.8 per cent respectively. While within this market segment, the MSCI Hungary index was ranked the poorest performer, with a return of -12.0 per cent with the MSCI Czech Republic index coming in next with a -11.0 per cent return.

Frontier markets made a comeback in 2010 after significantly lagging behind developed and emerging markets in 2009 with a return of 7.0 per cent. Overall they more than doubled this, posting a return of 18.3 per cent.

The MSCI Sri Lanka index was the top performer for frontier markets, posting a 73.2 per cent return, with the MSCI Bahrain index last among the frontier classification with a return of -23.0 per cent.

Within developed markest the US index returned 13.21 per cent, outperforming the European index which suffered due to the sovereign debt crisis. Despite that, Sweden was named the top performing index among developed markets, posting a return of 29.0 per cent.

The MSCI global small cap indexes repeated the success of 2009 in outperforming the MSCI global standard (large + mid cap) indexes across all regions. The MSCI small cap index outpaced its large and mid cap counterpart, MSCI ACWI, by more than 10 percentage points, posting returns of 23.2 per cent compared to MSCI ACWI’s return of 9.7 per cent. The large cap indices have a challenge in the coming year if it is to prevent the MSCI global small cap indices from completing an outperformance hat trick in the coming year.