Which asset classes lost investors most money in 2016?
20 Dec 16
Thanks to the end-of-year ‘Trump rally’, 2016 has been a pretty good year for investors in risky assets. However, not all asset classes have fared so well.
Emerging market equities have had their best year since 2010, but not all countries comprising the asset class fared well. Each of those have their own particular reasons.
Currencies played a major role as a return determinant in 2016, especially in emerging markets. Despite the Istanbul Stock Exchange being up almost 10% year-to-date, the weakness of the Turkish lira means foreign investors in Turkish equities are likely to have lost out. With the lira down 16.7% against the dollar this year (and having halved in value over the past four years), Turkish president Tayyip Erdogan even felt compelled to call on his citizens to exchange their dollars (and euro) for liras to prop up the lira. The political turmoil in Turkey has also been doing no good to the local equity market. A botched coup attempt in July sent the stock market down 18% in euro terms in a matter of days. Further political turmoil, in the form of a spree of terrorist attacks and an unprecedented purge on the opposition, has proved a further drag on performance in the past two months.
The Mexican peso has been as weak as the Turkish lira in 2016. Just like its Turkish peer, Mexico’s stock exchange is up in local currency terms this year. But foreign investors have still lost money because of the weak currency. The culprit for peso weakness is a little easier to identify than in the Turkish case, as it’s all about one man: Donald Trump. The Mexican peso shed 12% the day after ‘The Donald’ won the US presidential elections.
