If you ever needed proof that emerging market stocks in Asia love quantitative easing, this is the chart for you.
From Herald van der Linde, head of equity strategy for Asia Pacific at HSBC, it reveals the performance of emerging market stocks before and after introduction of QE programs in the US, Eurozone, Japan and UK since the end of the global financial crisis.
They’re pretty compelling figures with all markets recording gains of more than 10% in the three months following the introduction of a QE program. Indonesia, India and South Korea performed even better, logging average gains of 15% or more.
With central bankers from developed nations getting plenty of practice on providing forward guidance to markets, preconditioning them to expect another round of cheap money coming their way, it is also noteworthy that all markets recorded gains in the three months leading up to an official QE program being announced.
Clearly it’s not only about the implementation of the program, but merely a hint that it’s on the way.
While the cheap money funnels capital into emerging markets courtesy of increased carry trades, boosting asset prices, the problems that it leaves behind when unwound, let alone what it provides for economic growth, is on recent evidence nowhere near as impressive.