Recoupling and Inflation Doesn’t Explain Everything…

Amidst all the gloom and doom, we are told that the entire financial world is going to the gutter out of either the deflation laced recoupling theme or a global inflation contagion.

Thus, the focusing effect or placing too much emphasis on one aspect of an event essentially ignores spots in the world where divergences continue to exist.

Remember, historical performance, as shown below, may not replay.

The point of the exercise is to show you that generalized thinking can be pockmarked with inconsistencies.

Here are some of the world’s outliers…

Costa Rica…

Bloomberg: The BCT Corp Costa Rica Stock Market Index is a market capitalization weighted index. Above is the 5 year chart.

May inflation rate is 11.9%, according to focus-economics.com

Lebanon…

Bloomberg: The BLOM Stock Index (BSI) is a capitalization-weighted index of all the listed companies on the Beirut Stock Exchange. Above is the five year chart.

Inflation is about 10% year on year in march (Reuters). Aside according to Daily Star, ``Fitch Ratings' Inflation Vulnerability Index ranked Lebanon as the 29th most vulnerable country among 73 emerging economies in Europe, the Middle East, Africa, Asia and Latin America, and the second most vulnerable in the Middle East and North Africa (MENA) region, said the latest issue of Byblos Bank's Lebanon This Week.”

Namibia…

Bloomberg: The Namibian Overall Stock Exchange Index is a weighted market capitalisation index. Above is the five year chart.

The annual rate of inflation increased moderately from 7.8% in January to 7.9% in February 2008. (allafrica.com)

Tunisia…

Bloomberg: The Tunis Stock Exchange TUNINDEX is a capitalization weighted index containing equities from the Tunis Stock Exchange. Above is the five year chart.

Tunisia's consumer price inflation decelerated for the first time in almost a year to 5.3% in May due to a seasonal slowdown in food prices as the new local harvest comes to the market, Reuters reported. (magharebia.com)

Bahrain…

Bloomberg: Bahrain All Share Index is a capitalization-weighted index of all Bahraini public share-holding companies listed on the Bahrain Stock Exchange.

Above is the 5 year chart.

"Month-on-month figures cited by the Central Bank of Bahrain suggest that the Consumer Price Index reached 6.2 per cent year-on-year in April this year." (menafn.com)

Kuwait…

Bloomberg: Kuwait Stock Exchange Weighted Index is a capitalization-weighted index. Above is the 3 year chart.

“Kuwait prepared to unveil a plan to battle inflation, which hit 10.14 percent in the latest measure, driven by housing and food costs.” (arabianbusiness.com)

Qatar…

Bloomberg: The DSM 20 Index is a capitalisation weighted index of the 20 most highly capitalized and liquid companies traded on the Doha Securities Market. Above is the 5 year chart.

“The figure, however, was 'hardly catastrophic' compared to neighbouring Qatar, which has seen inflation surge to almost 15 per cent year-on-year” (menafn.com)

Oman...

Bloomberg: The Muscat Securities Market Index, MSM 30, is a capitalization-weighted index of the 30 most highly capitalized, liquid and profitable companies listed on theMuscat Securities Market. Above is the five year chart.

“Oman's inflation rate hit an 18-year high in the first quarter of 2008, with annualised price rises at 11.5% at the close of March. (menafn.com)

Of course there could be many other factors (hot money etc…) which may have contributed to their outperformance.

Bottom line: Inflation and Deflation doesn’t explain everything.