Top Ten Countries in the MSCI EAFE Index (as of 3/31/15)
Chart of the Week for April 17, 2015 - April 23, 2015
The Morgan Stanley Capital International ("MSCI") Europe, Australasia, and Far East Index ("EAFE") is a benchmark commonly used to measure non-U.S. developed country stock market performance and the MSCI Emerging Markets ("EM") Index is a benchmark commonly used to measure non-U.S. emerging country stock market performance. Each index consists of about twenty countries and a country cannot be a member of both benchmarks. The bar chart above shows the net performance in U.S. dollars for the one-year periods ended March 31, 2015 ("current" period) and March 31, 2014 ("prior" period) for the MSCI EM Index, the MSCI EAFE Index, and the top 10 non-U.S. developed countries. The top 10 countries were determined by their market capitalization in the MSCI EAFE Index as of March 31, 2015. The country with the largest market capitalization (Japan) is listed first, and the country with the smallest market capitalization of the ten countries reported (Netherlands) is listed last.
From the perspective of a U.S. dollar-based investor, the EAFE Index lost 0.92% in the current period (blue bars above), in contrast with the positive 17.56% return in the prior period (gold bars above). In the current period, the three countries that posted positive returns in U.S. dollar terms were led by Hong Kong (+15.25%) and Japan (+12.06%), with Netherlands posting a slight increase (+0.22%). Hong Kong stocks benefited from a rule change that now permits Chinese mutual funds to invest in the Hong Kong market. Drivers of the outperformance of the Japanese market include their monetary easing program and their ongoing economic progress. Generally, the developed European markets experienced positive returns in local currency terms largely due to the monetary easing policy of the European Central Bank and improving economic conditions. However, the depreciation of the euro versus the U.S. dollar caused the returns to be negative in U.S. dollar terms.
Emerging markets had a slightly positive gain in current period, compared with the negative return in the prior period. Multiple factors contributed to this moderate return including stabilization of commodity prices, continued economic stimulus of China, the ceasefire of Ukraine, and the temporary relief of the Greece crisis.
No one can be certain in which direction individual countries or entire markets will move in the future, as past trends are no guarantee of future results. It is important to understand the principles of domestic and international markets and diversification before investing.
Posted by: sarah_oz@yahoo.com
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