Despite the rally in European banking stocks on Wednesday, the sector has now touched a depressing milestone.
Over the last year, the selloff in developing-market banks has now been as steep as that of their emerging-market peers.
MSCI’s world index covers 23 developed-markets, while its emerging-markets index covers 23 developing nations. Looking at the stocks across both shows just how much harder developed-market banks have been hit this year
At the end of 2015, banks in the developed world were down 4.45% for the year. That performance is nothing to write home about, but was far better than emerging-market banks, which tumbled 15.4% over the same period.
But the collapse since the beginning of the current year has been much more pronounced in the developed countries, where banks fell by very nearly 20%, far less than the 8% drop recorded for emerging-market banks.
Taken together, over the last 12 months, that leaves developed-market and emerging-market banks down by practically the same amount. At the end of the day on Tuesday, EM banks were down by 21.6%, in comparison to a 21.8% fall for banks in the developed world.
The spurt of buying in European bank stocks on Wednesday will help to prop up the index of developed-markets, but the picture is still stark: A significant stock market performance gap between banks in the developing and developed worlds has now practically closed.
The MSCI indices are calculated in the local currencies of the countries included, so the performance of emerging-market stocks is better than it would be in dollar terms, but the picture is still similar: what seemed to be a major selloff in emerging-market banks at the end of last year has now been practically matched by their developed peers.