The Korean and Indonesian stock markets rebounded in July, in U.S. dollar terms, gaining 30.8% and 26.8% respectively, turning in the top emerging markets performance in the MSCI Emerging Markets Free index.
Emerging markets as a whole returned 2.8%, as China, Malaysia, and the Philippines continued their downward slide.
The China free index returned -8.1%; Malaysia free, -10.8%; and the Philippines free, -9.7%. Worried about China's economic prospects and possible devaluation of the yuan, foreign investors sold off Chinese shares. Poor corporate earnings and a bleak economy dragged down Philippine shares.
Developed markets were led by Finland, up 11.3%; Italy, 9.9%; and New Zealand, 8.2%. The Finnish government boosted its GDP estimate for 1998 to 5.5%, up from 4.5%, and expects growth to hit 4% next year, up from a previous estimate of 3.3%.
The MSCI EAFE index, however, gained only 0.9% in dollar terms, weighed down by losses in Malaysia, -10.8%; Hong Kong, -7.9%; and Canada, -7.2%. Canada was hit by its weakening currency, depressed commodity prices due to lowered Asian demand, and a lackluster U.S. stock market.