Scorecard From This Week's Global Equity Bloodbath

This chart from Bespoke presents a good coverage of this week's resurgent volatility. According to Bespoke,

``As shown, both the G-7 and BRIC countries sit at the top of the list of worst performers. The countries that have held up better are located mainly in the Middle East, Africa, and Eastern Europe.

``Combining the BRICs and the G-7, Russia has done the worst since Tuesday with a decline of 6.33%. But Brazil and the US are not far behind with declines of more than 5%. Italy, France, and Germany are all down around 4.75%, followed by Britain at -3.81%. There has been lots of talk about China partly at fault for the global sell-off, but the country itself is down just 3.64% since 1/19. Japan has by far done the best of the G-7 and BRIC countries over the last three days with a decline of just 1.62%."

While it is true that BRICs got equally hit as hard as the G-7, the picture isn't complete. In any comparison, points of references are important because they can tilt balance of presentation.

Remember, in 2009 the BRICs outperformed the G-7 by a wide wide wide margin hence it should be natural for them to bear the brunt of the recent carnage.

However, last week's selloff reveals that the damage hasn't been significantly different. And if the current correlation continue, one can expect the BRICs to materially outperform its G-7 counterparts anew.

Although as seen from a year to date (or on a 3-week) basis on the left column, the BRICs have marginally underperformed the G-7, however 3 weeks is too early to call.

Nevertheless the overall market conditions should give us some clues.

As mentioned by Bespoke some markets in former crisis plagued Eastern Europe and the Middle East have outperformed.

For instance, Estonia was up 7% on a week on week basis but is up 30% (!!!) on a year to date basis and so with her peers (also based on year to date) Latvia 15.04%, Lithuania 11.29%, Romania 7.2% and Ukraine 7.08 as well as Malta 13.27, Kenya 11.73%, Egypt 9.76% and so forth...

While everyone's focus (as indicated by Bespoke's article) has been on how the key markets got hammered (BRICs and G-7), what may have been ignored by the rest is how the broad periphery (emerging markets) had been vastly unfazed by the ruckus.

This for us, implies two significant messages:

First, that the periphery signifies delayed or belated reaction from the still to be felt ripples or

Second, that many emerging markets will likely show signs of meaningful divergences (decoupling), which could mark the theme for 2010.

And if it is the latter scenario, then this week's meltdown could be suggestive of a bear market trap.