China tops the charts

China has bucked the trend to come out on top as the best-performing emerging market of 2014.

It's been another frustrating year for investors in emerging markets. The MSCI Emerging Markets Index fell by over 4% in dollar terms, and earlier this month hit an 18-month low. Asia ex-Japan eked out a gain, but oil and commodity-exposed Latin America fell by 15% and eastern Europe bedevilled by its proximity to Russia fell by 36%.

It's a reminder once again that fast economic growth doesn't necessarily mean a strong stockmarket performance. China's domestic stocks, as represented by the Shanghai Composite index, have been the world's top performers this year, up almost 40% in dollar terms despite the slowdown in the Chinese economy.

This is partly because it's now possible for foreign investors to access the market via Hong Kong. Investors are also betting that the government will be rattled by weaker growth and so soon give the economy another shot of liquidity, by loosening rules on bank lending.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Pakistan and Egypt are economic recovery stories. Egypt is bouncing back from three years of turmoil, helped by reforms to the energy sector and a more coherent legal framework for foreign investment.

Pakistan has got its act together since the International Monetary Fund bailed it out last year. Inflation has fallen to an 11-year low of 4%, and annual GDP growth is running at 4%, the fastest in six years.

Its neighbour India has jumped as new prime minister Narendra Modi has signalled a new round of pro-market reforms.

Venezuela's tiny market has done well given that sliding oil prices mean it faces "an almost existential threat", as Allister Heath puts it in The Daily Telegraph. Government exchange controls mean investors can't move money out easily, so they buy stocks to give themselves a chance to beat galloping inflation.

Oil is also a recurrent theme at the bottom of this year's emerging-markets league. In Colombia it accounts for more than half of exports and a sixth of government revenues. In 2010, almost half Nigeria's crude went to America; by July this year, none did. In Russia, the trouble was oil and politics.

The latter was Greece's main failing this year. Its market lost 13% in a day when an early election raised the prospect of a government of left-wing populists. The Russian invasion of Ukraine, finally, has wiped out 10% of the country's income this year.

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.