The FT and others are pointing out that global stock markets through June recorded their best quarterly performance in more than 20 years after literally imploding during the global financial crisis. Tokyo's Nikkei 225 is up 23% and better than the S&P 500's 15% or the FTSE 100's 8%, but emerging markets like China and India have surged more than 50%.
The result is that the total market capitalization of Asian markets (World Federation of Exchanges data to end May, including Asia Pacific markets) now account for more than 30% of global stock market capitalization, and the market cap of Asian markets is now higher than that of European (including Africa and the Middle East) stock markets. While North American (including Middle, South America) still dominate with market cap of $15.25 trillion, Asian market cap is back up to $11.6 trillion and closing the gap.
On the other hand, market cap of the Japan market is under 10%, meaning global index investors are increasingly passing Japan by. Other Asia on the other hand has growing demand supported by a growing population, better economic growth potential and was relatively less affected by the US subprime crisis. China (Shanghai) is up 62.5%, Russia is up 50.6%, India is up 50.2% and Brazil is up 38.8%--leaving Japan's 12.4% gain in the dust (January~June performance).
Similarly, the recent IMF numbers (Q1'09) show that the Japanese yen's share of global central bank reserves was only 2.9%, versus 64.9% for the US dollar and 25.9% for the Euro, which gives you a pretty clear indication of how central banks view the usefulness of the Yen as a global currency.
The inconvenient truth for Japan is that it is being passed by its Asian neighbors, as its economy has become more cyclical, i.e., declining more in recessions and lagging in recoveries, and a rapidly aging population is quickly reducing the nation's savings rate (to only 2%) at a time when government debt threatens to balloon to 200% of GDP.
For growth investors, the BRICs/emerging markets are clearly preferred.
