Global Stock Market Performance Update: Despite China's Decline, Emerging Markets Dominate

No trend goes in a straight line. That's the fundamental truism of the marketplace.

Yet some analysts have taken China's monstrous 2 week decline as something to gloat on.

True, China has entered the bear market cycle based on the 20% decline technical rule.

But it is unclear that she could suffer from the same fate of the 2008 meltdown. Yet, we won't bet on such idea, especially not when global policymakers have been targeting the asset markets.

Nonetheless here is the updated year to date global performance chart from Bespoke Investments.

From Bespoke Invest, (bold highlight theirs)

``After a 20% decline in a matter of days, China is now just the third best performing BRIC (Brazil, Russia, India, China) country year to date. Russia is up 57.24% year to date, India is up 53.51%, and China is up 52.99%. But it could be worse for China. At least they're not down 50% year to date like Ghana.

``You can tell how much China has sold off versus the rest of the world by looking at its percentage from its 50-day moving average. China is one of just 5 countries that are up year to date and currently trading below their 50-day moving averages, and it is the second furthest below its 50-day (-10.34%) out of all countries behind only Nigeria (-11.97%)."

As we discussed in Global Stock Market Performance Update: Proof of Rotational Effects and Tight Correlations, it has been quite evident that the pricing of global stocks appears to be in rotation, which clearly is a symptom of global inflation dynamics.

Moreover, despite the precipitate 20% decline in China, they remain at the tenth spot among the world's best performers.

China's decline simply brings the BRIC (Russia-7th, India- 9th and Brazil 11th) in a tight pack of the race.

Recall earlier too that Russia fell 30% before rebounding (top window) but has presently been creeping higher. The same actions had been realized in India (BSE) and Brazil (BVSP) but both have recovered strongly.

In contrast, China's rise has been vertiginious or without any major correction since February. So the sharp decline seems much desired, as to normalize its long term trend. The same dynamics seen in its peers are likely to take hold on China's Shanghai index once it establishes a bottom.

Yet regardless of China's recent fate, the BRIC and emerging markets has simply outclassed, by a mile, developed economies, where 9 of the top 20 have been Asian bourses (by pecking order: Indonesia, Sri Lanka, Vietnam, India, China, Taiwan, Philippines, Singapore, Thailand and Hong Kong).

So it would seem like a pointless exercise to gloat over China's recent losses. In horse racing lingo, China's recent decline could be interpreted as part of the "handicapping" relative to developed economies.

Anyway here is the chart (courtesy of Bloomberg) of the world's topnotch equity bellwether-Peru.

If there is anything to be discerned from the above, no trend goes in a straight line.