Nasdaq Is Not God of World Economy Any More

US stock market, that has been leading the world economy, is rapidly losing its vitality these days, reported the Asian Wall Street Journal (AWSJ) on Mar. 25th.

There is even an expectation of counterflow phenomenon that international financial capital might slip out of US into other countries as the emerging markets (new market) have outrun US market in their price-earnings ratio for last one year, said the newspaper.

▽ Spotlighted emerging market 〓 According to the Wall Street Journal, the average stock rise rate has been up to 11.3 percent (US MSCI global standard) in emerging markets for last 52 weeks. Meanwhile, the corresponding rate of US Dow Jones remained 4.1 percent. In case of Korea, representative new market in Asia, the composite index rose 25.6% from early this year, as of Mar. 22nd, while US average index (on MSCI standard) remained only 0.5% up. Global fund managers forecast “if the new market keeps higher ratio in their profit for further three to five years, it cannot avoid counterflow phenomenon of funds into other countries.”

Morgan Stanley investment analyst Jay Pelosky analyzed through his recent report on economic performance, “The global economy is changing to a triangular system centering around Asia, Europe and US from US-led single market system.” He also said, “The catch up or outrunning by new markets will be sped up.”

▽ Price merit in addition to business upturn 〓 Economic specialists explain this strong feeling of emerging markets as `decoupling effect`. It is analyzed that US stock price is relatively higher with its bubbles not removed yet, while global economy is generally recovering from the long stagnation. It is noted that emerging markets get stronger bounce at their recovering stage and also relatively low-valued `price merit` is being highlighted. “We will not be able to prevent the funds from slipping out of US,” Director Steve Ors, managing global fund in US Federated Investors, said, “but it is just a matter of time.”

JP Morgan economist James Glasman said, “I totally agree on the opinion that US lacks power of leading the global stock market at the moment.”, but added “no market is not so low-valued.”

Jung-Ahn Kim credo@donga.com