[Real Investment] Volatile Global Stock Market, Thrilling Returns from Developed Country Funds

North America Region Achieves 12% Monthly Returns
Europe and Yen Depreciation Boost Japan to Top Ranks

Among Emerging Markets, Only India Performs Well with Over 10%
Default Crisis Lowers Emerging Market Investment Appeal
China's Economic Slowdown Deals Severe Blow to Emerging Markets

[Asia Economy Reporter Minji Lee] Amid rising volatility in global stock markets due to economic slowdown pressures and changes in major countries' tightening policies, developed country funds have recorded overwhelmingly higher returns compared to emerging markets. Among emerging markets, only India posted solid returns, but there are concerns that the 'King Dollar' trend may not quickly reverse, potentially leading to a downturn.

◆ North American Funds Rebound... Japan Benefits from 'Weak Yen'

According to financial information provider FnGuide on the 3rd, when analyzing overseas equity funds by country over the past month, the region with the highest returns was North America, recording 11.89%. India followed with 10.48%, then Europe (6.94%), Japan (6.37%), Brazil (6.34%), Latin America (3.28%), and EMEA (2.42%). Countries with negative returns included Greater China (-8.53%), China (-7.42%), Emerging Europe (-4.28%), Asia Pacific excluding Japan (-2.23%), and Vietnam (-1.64%). During this period, domestic equity funds posted a return of 7.54%.

The Federal Reserve (Fed) of the United States hinted at a possible change in its tightening policy, which had been rapidly implemented since the beginning of the year due to recession concerns, boosting North American fund returns. The stronger-than-expected earnings of major tech stocks also contributed positively. Over the month, the three major U.S. indices showed the following performances: the Nasdaq rose 9.07%, the Dow Jones Industrial Average increased by 4.61%, and the S&P 500 gained 6.87%.

All of the top-performing funds during this period were North American equity funds. The ‘Mirae Asset TIGER Philadelphia Semiconductor Leverage ETF’ recorded the highest return at 34.6%. This fund employs a strategy that seeks to double the performance of the Philadelphia Semiconductor Index, which invests in major global semiconductor companies. It was followed by the ‘Mirae Asset TIGER U.S. Nasdaq 100 Leverage ETF’ (27.3%) and the ‘Samsung KODEX U.S. Clean Energy Nasdaq ETF’ (19.7%).

Investor sentiment toward North American funds remains strong. Over the past month, 15.6 billion KRW flowed into North American funds, and extending the period to the last six months, a net inflow of 2.4017 trillion KRW was recorded due to bargain buying.

Individual investors also increased net purchases of Japanese funds. Japanese funds attracted 102.2 billion KRW over the past month. The expectation that Japan will maintain a low-interest-rate policy while tolerating inflation has drawn investor interest, as it could outperform other countries. Indeed, the Nikkei 225 index of the Tokyo Stock Exchange rose about 6% over the month and showed a 1.8% gain over six months, indicating limited decline compared to other countries.

However, some opinions suggest that this environment may not continue until the end of this year. Ha Geon-hyung, a researcher at Shinhan Financial Investment, said, “Although the Bank of Japan (BOJ) maintained its monetary easing policy by keeping rates unchanged at last month’s monetary policy meeting, it is expected to gradually adjust the pace of easing considering inflationary pressures and side effects of monetary easing.”

◆ Default Crisis Dampens Emerging Market Investment Appeal

Among major emerging markets, the strong performance of Indian funds is attributed to expectations of benefits from China’s zero-COVID policy and the spillover gains from the U.S.-China conflict. However, the market consensus is that it is still premature to increase interest in emerging markets despite India’s advances. The strength of the dollar and concerns over export declines due to global economic slowdown are significant burdens on emerging markets. Some emerging countries are exposed to foreign debt default risks as foreign capital outflows intensify.

China’s economic slowdown is particularly critical for emerging markets. China’s Q2 GDP growth was only 0.4% year-on-year, and the July manufacturing PMI stood at 49, failing to surpass the expansion threshold of 50. Since the Politburo meeting last month emphasized system stabilization over economic stimulus, expectations for additional stimulus have diminished. Lee Jin-woo, a researcher at Meritz Securities, analyzed, “Economic slowdown triggers increased fiscal stimulus in emerging markets, which exacerbates debt repayment burdens, creating a vicious cycle. More time is needed for emerging market investments.”

Above all, for emerging markets to rebound, the currently strong dollar must reach an inflection point. This requires a change in the U.S. interest rate hike stance and strong confidence in European economic recovery. Ahn Young-jin, a researcher at SK Securities, stated, “Changes in the Fed’s rate hike stance may spread following last month’s FOMC, but the perception that the European economy is at its bottom has not yet formed. With the prolonged Russia-Ukraine war and Europe’s energy issues not worsening, more time is needed for a weaker dollar.”

This content was produced with the assistance of AI translation services.