Gold - the perceived safe haven for so many, has been the worst performing sector of 2013. Gold bullion has considerably fallen in value this year – the first year that it has lost investors money in 14 years. Shares in gold mining companies have fared even more poorly, losing more than half their value, the second year of losses in a row. According to BlackRock, gold exchange traded products saw outflows every month this year – in contrast to record-breaking flows in 2012 – and assets declined by 48%.
The Euromoney Global Gold index has been the worst performing sector of 2013 – losing half of its value. The Morningstar Metals Commodity sector is also down 27%, dragged down by gold. After gold, the Turkish stock market has declined the most, down 32%, and the FTSE Turkish Lira Government Bond index has fallen 26%.
Jan Dehn, Head of Research at Ashmore, says that the 2014 local elections in Turkey will be important for the future of Turkey’s economy.
“A poor showing could prompt Erdogan to move the parliamentary elections – and hence economic reform – forward by a year to coincide with the presidential election this coming summer. Since he has no serious challenger he should win the presidency handsomely and holding the parliamentary elections at the same time would allow AK parliamentarians to ride to victory on his coat tails. Ironically, the weaker the AK party’s performance in March, the better the prospects for economic policy change in Turkey,” she said.
“Still, our base case is the AK party emerges with a clear victory in the March local elections, despite the current shenanigans. This means that the parliamentary elections take place in 2015 as per the original schedule and there will be no material reform and no change in monetary policy before then.”
Indonesia has also fared poorly – down 26%, and the Brazilian stock market has fallen 18% this year. Both markets were hit by the threat of the Federal Reserve withdrawing quantitative easing stimulus. Neptune Latin America fund manager Tom Smith said talk of tapering caused weakness in equity markets and currencies through the summer, a strong rebound following the delay of tapering in September, before final weakness into year-end as US economic and employment data proved stronger-than-expected and worries over tapering re-emerged.
“Domestically we saw a shift to more orthodox monetary policy as interest rates rose steadily throughout the year in order to reduce inflation, which remains above target. Economic growth continued to rebound from the 2012 lows and we saw more auctions for airport and toll road concessions, helping to stimulate private investment,” said Smith.
The next 12 months should be more profitable for Brazil thanks to the October election.
“Much of the focus in 2014 will be on the October election,” said Smith. “Current polls suggest Dilma Rousseff will be re-elected although the market should react positively if opposition candidates gain in the polls. The government’s focus will remain on keeping unemployment low and inflation inside the target band.”
