Developed world stock markets generally rose in the first four months of 2000. In local currency ter...
In local currency terms, the BMI World Index gained 1.45%, although due to the strength of the dollar versus most major currencies, it declined 1.29% in dollar terms. Higher energy prices, especially for crude oil, threatened to ignite inflationary pressures, as did increasingly tight labour markets in the US and UK.
Except for the Bank of Japan, which continued its policy of near-zero overnight lending rates, the world's major central banks generally increased their benchmark interest rates.
The US Federal Reserve has increased its target lending rate to a nine-year high of 6.5%. Similar actions were taken in Canada, the UK and by the European Central Bank.
Sweden and Finland
For the year to date through the end of April, the BMI Sweden and Finland were the top-performing markets.
In dollar terms, Swedish stocks have risen by 18.09% and Finnish equities have increased by 16.89%. Impressive gains in wireless telecoms companies, specifically in the shares of Ericsson in Sweden's case and Nokia Oyj in Finland's case propelled these markets higher.
The B-class shares of Ericsson rose 39% in simple price terms, while Nokia Oyj, by far the largest company by weight in the BMI Finland, gained 27.5% from the end of 1999 in dollar terms.
Overall, Ericsson was the ninth best performing stock in developed Europe, while Nokia was 18th.
Emerging markets were volatile during the first four month of 2000. The top emerging markets through April, were Russia, the Czech Republic and Pakistan. The fundamental factors underlying these countries' stock market gains were varied.
In Russia, equities rebounded in response to a surprisingly quick recovery from the 1998 government bond default. Official data placed first quarter GDP growth at 6.8%, accelerating from the 3.2% expansion in 1999. Consumer price inflation slowed to an annual rate of 19.8% in April, still high, but well below the 84.4% rate of inflation reached in 1998.
The top-performing stock in Russia and the second best in emerging markets overall was Lukoil, which posted an 84.7% price gain. In dollar terms, the BMI Russia Index posted a 21.73% advance for the year to date through April.
Czech stocks rose due largely to investor enthusiasm about Czech accession to the European Union and better than expected economic performance.
Consumer price inflation fell unexpectedly in April, and this year's rate of increase is projected to fall short of the central bank's target range of 3.5%-5.5%. Unemployment fell to 9% in April and the central bank expected GDP to expand by 1.4% in 2000, reversing three years of decline.
The top-performing Czech stock for the year through April was Komercni Banka, which rose 50.4% in koruna terms, equal to a 35.3% gain in dollar terms.
Finally, the BMI Pakistan increased 16.89% as relative calm returned both politically and economically. Although little progress toward reducing tensions with India was made when US president Bill Clinton met with General Pervez Musharraf, who took power following a coup last October, Pakistan indicated willingness to negotiate with India to resolve the row over the disputed Kashmir province.
The Asian Development Bank issued a forecast predicting that the economy would expand by 4.5% for the year ended June 2000. Top stocks through April were Pakistan Telecom and Pakistan State Oil, which rose 35% and 32.9%, respectively.
Ian Toner is vice-president of the Equity Index Group at SalomonSmithBarney
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