Japan performance vs other global market indices

by SR on April 16, 2012

On Friday I updated the chart showing Topix sector index performance since the market bottomed in late November 2011. I like this kind of “small multiple” graphic because a glance is enough to show which sectors have outperformed and underperformed and as I point out, since the start of March the emphasis has shifted to defensives and away from momentum plays. When investors have caught their breath, I expect them to become more selective and to overweight the auto parts and rubber sectors.

Global market index performance from late November 2011 to end of February 2012

One reader had a question: what would a similar chart look like if we used global market indices rather than Topix sector indices? To put it another way, how has Topix fared relative to other markets? The answer, as shown in the graphic above, is that Topix performed well from November 2011 to the end of February 2012. I find it reassuring that Topix has not performed dramatically better than other markets in a way that makes it look overbought. (Click on the image for a larger view.)

Topix has also been more resilient than most other indices since the start of March.

Global market index performance in March and April 2012

What really stands out is how much of a dog the Shanghai market has been since November (by comparison the Hang Seng has made a respectable showing). Shanghai did poorly during the run-up from the end of 2011 to the spring of 2012 – and has fallen more than most major indices since. No doubt the domestic Chinese investor has been suffering, but we’ve all been in this situation ourselves and investments is not a game for those who bruise easily.

A further refinement would be to plot the indices in dollar terms to normalise for currency effects. I usually create both, but don’t have one to hand for this particular chart.

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