The American election and the news on the jab have renewed investors’ appetite for risk
An Indian Economic official once remarked to Buttonwood that his country’s economy does best when the rest of the world does well—but not too well. India’s exports benefit from global growth. But when the world economy gains too much momentum, interest rates and oil prices can rise uncomfortably high, hobbling a country that is a net importer of both capital and crude.
His observation came to mind as India’s stockmarket roared to a record high on November 10th, after news that a covid-19 vaccine developed by Pfizer and BioNTech was proving more effective than expected. It will be months before it becomes widely available even in the countries equipped to handle it. But the reproduction number of investors’ exuberance can be very high.
Another spur to India’s stockmarket—and to emerging-market equities more broadly—was America’s election. The result, when it emerged at last, removed one lingering source of uncertainty. That has made room in investors’ stomachs for other types of risk. The renewed appetite for edginess helped lift msci’s benchmark emerging-market equity index by over 6% from November 3rd to 9th. It is now up by more than half from its lowest point in March.
Though Wall Street has been setting records, the emerging-market index is still far from the all-time high it reached in 2007 or even its peak in 2018. Indeed over the past decade emerging-market shares have made little forward progress, albeit by the most nail-biting route possible. Big gains in 2012, 2016-17 and 2019 were offset by spectacular falls in the intervening years. Overall the index is just 3% higher than ten years ago.