2011 – A Review

These past year has been a tumultuous time for the stock markets. Stock markets worldwide saw great volatility amid various global economic scenarios. The US credit rating getting downgraded to AA+ from top-notch AAA rating in August by S&P and the European debt problem raging filled the financial pages of newspapers worldwide. Even though most of the problems were in Europe and US, the Asian markets fared worst than most of the US and European markets as we will see later. This shows that it’s hard to predict what the markets will do even if the problem are concentrated in a particular region per se.

Straits Times Index (STI)

Starting of the year of 2011, I went to a market outlook seminar by one of the top stockbroking houses and the researcher predicted STI to reach 3,500 points in the first quarter of 2011 and to even reaching 3,600 in the year. However, the highest STI ever reached last year was 3279 points on 6th Jan 2011. On the contrary to predictions, the STI was actually down 17.1% for the year. On 31st Dec 2010, it closed at 3190 and on 3oth Dec 2011, it closed at 2646. It even threaded close to a bear market scenario, which means coming down at least 20%.

(Source: Yahoo! Finance Singapore)

Hang Seng Index (HSI) and other Asian markets

HSI wasn’t spared as well. HSI fared worst than STI in 2011. On 31st Dec 2010, it closed at 23,035 and on 30th Dec 2011, it closed at 18,434. It was down 20% for the year, taking it into a bear market region for the year.

(Source: Yahoo! Finance Singapore)

According to Straits Times report on 31st Dec 2011, the Shanghai Composite Index is down 21.1% for the year and Nikkei 225 is down 17.3%.

Dow Jones Industrial Average and S&P 500

Surprisingly, the Dow Jones Industrial Average (DJI) finished 5.5% up for the year and the S&P 500 finished off exactly flat for the year. Thus, it can be clearly seen that the Asian markets got a bigger beating than the American counterparts.

(Source: Yahoo! Finance Singapore)

(Source: Yahoo! Finance Singapore)

To add on to the surprise, we will see later that 3 out of the 4 European markets finished 2011 better than STI, HSI, Shanghai Composite Index and the Nikkei 225.

European Markets

CAC 40 (French market) – CAC 40 closed down 17% for the year

(Source: Yahoo! Finance Singapore)

DAX (German market) – DAX closed down 14.7% for the year

(Source: Yahoo! Finance Singapore)

FTSE 100 (British market) – FTSE 100 closed down 5.5% for the year

(Source: Yahoo! Finance Singapore)

FTSE MIB (Italian market) – FTSE MIB closed down 25.2% for the year

(Source: Yahoo! Finance Singapore)

The Italian market fared worst among the European markets. It’s of no surprise since Italy is next most indebted nation after from Greece in the Euro region. What’s surprising as I mentioned earlier is that the Asian markets fared worst than CAC 40, DAX and FTSE 100. The crux of the world economic crisis is in Europe but Asian markets finished 2011 worst off.

In conclusion, it’s hard to predict the movement of the stock market and it is futile timing the market according to the crisis. Even though the crux of the problem was in US and Europe, the Asian markets fared worst off. A lesson for all of us – we just have to save up enough cash and buy bit-by-bit whenever the opportunity arises and not worry about how the global economy will pan out. Have a fruitful year ahead and remember, invest diligently!