Interactive Investor

The best and worst-performing stock markets of 2020

22nd December 2020 09:01

Tom Bailey from interactive investor

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A handful of Asian and European markets experienced some of the best performance of the year. 

The best-performing stock market in 2020 was South Korea, with a price return (in sterling) of 37.9% from 1 January to 7 December, figures from Morningstar show.

While South Korea was one of the first countries outside China to experience a significant outbreak, its stock market staged a strong recovery this year. There are several reasons for this. Many of the country’s tech exporters continued to do well despite the global pandemic. In addition, the South Korean government controlled the virus relatively well, allowing for the domestic economy to perform better than in Europe or North America.  

South Korea’s strong returns were followed by Denmark. The small Scandinavian country was able to return investors just under 33% in 2020. Denmark’s stock market is dominated by healthcare companies alongside several renewable energy firms.

Denmark was one of several small European countries among the 10 best performers. The Netherlands and Finland both returned almost 21%, while Ireland returned 15.4% and Sweden 24.4%.

The third-best performing market in 2020 was Taiwan, with a return of just over 30%. Similar to South Korea, Taiwan benefited from its large high-tech manufacturers, alongside better domestic economic conditions owing to its government managing to keep a tight grip on the Covid-19 outbreak.

Close behind Taiwan was China, with a return of 27.3%. Chinese equities have generally had a strong year, with the total market cap of all listed Chinese equities reaching $10 trillion (£7.4 trillion).

The US has also had a good year, with Morningstar’s index for US equities up by more than 17%. Generally, this was led by the strong performance of US large-cap tech companies, which benefited from a combination of the ability to adapt and thrive in lockdown, as well as lower interest rates.

Top 10 markets in 2020

Index Name Return 
Morningstar Korea 37.90
Morningstar Denmark 32.54
Morningstar Taiwan 30.26
Morningstar China 27.33
Morningstar Sweden 24.42
Morningstar Netherlands 20.57
Morningstar Finland 20.52
Morningstar US Market 17.22
Morningstar Ireland 15.37
Morningstar New Zealand 15.00

Source: Morningstar. Return in GBP, year-to-date as at 7 December 2020. All indices Net Return (NR), with minimum possible dividend reinvestment.

Poor performers

The worst-performing market was Brazil, losing more than 21%. Brazil’s economy and stock market is dominated by large oil and mining companies. As a result, its fortunes are largely determined by energy and commodity prices, both of which have suffered due to lockdowns.

Several other Latin American nations were among the worst-performing markets. Colombia lost investors just under 21%, while Peru lost 17.8% and Chile 11.6%. All three markets suffer from the same exposure to world energy and commodity prices.

Russia was also hurt by the global collapse in energy prices, with its index down 15.3%. The country is largely dependent on energy exports, with its stock market dominated by energy giants such as Gazprom (LSE:OGZD) and Lukoil (LSE:LKOD).

Another poor performer was Turkey, which saw its market index fall by 15.9%. Investors grew increasingly concerned about Turkey’s geopolitical risk this year. Most notably, there has been concern about the country’s dispute with Greece over territorial waters.

At the same time, there have been worries about the domestic economic policies of the government, with President Recep Tayyip Erdogan and the Turkish central bank taking a somewhat unorthodox approach to monetary policy, with the lira sharply devaluing.

The UK was also among the 10 worst markets of 2020, losing around 11%. In part this is due to the composition of the UK market, which has a lot of energy and mining companies, as well as banks. In addition, unlike other developed markets, the UK has relatively little technology companies listed.

Worst 10 markets in 2020

Index Name Return
Morningstar Brazil -21.15
Morningstar Colombia -20.94
Morningstar Egypt -19.90
Morningstar Hungary -19.10
Morningstar Peru -17.84
Morningstar Turkey -15.85
Morningstar Russia -15.28
Morningstar Chile -11.54
Morningstar UK -10.90
Morningstar Greece -10.87

Source: Morningstar. Return in GBP, year-to-date as at 7 December 2020. All indices Net Return (NR), with minimum possible dividend reinvestment.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

 

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