A summer of stock market gloom

GMC truck
Image caption A sharp fall in sales of GM-made vehicles spoilt the carmaker's moment of glory

August was hard work in the equity markets by anyone's standards: light volumes and bad economic figures piling up one after another like a student's heap of dirty washing - increasingly depressing as each day passes and no one willing or able to do anything about it.

It was hard to find a decent bit of news the whole four weeks long, apart from maybe GM's return from the dead, telling the world that it was due to relist in the coming months (all rather spoilt the moment we hit September with news that its US sales were down 25%).

The most positive spin that can be put on the month is that the FTSE managed to keep its head above 5,000 despite the welter of grim numbers - demonstrating a resilience that some people managed to find encouraging.

And yet, and yet - there were some beacons of hope, particularly in emerging markets.

Asian health

The main performers here are the Indonesian, Philippine, Malaysian and Thai markets, which have gained 2%, 6%, 6% and 7% respectively in August.

The economic stories here are a lot more healthy than anything we have seen in the US, Japan or Western Europe.

"While so many asset classes suffered very badly in the developed world during the crisis, it simply didn't happen here," says Michael Ganske, head of Emerging Markets at Commerzbank.

"Property markets did not fall that much, borrowing was a lot lower and the economies are a lot more diverse than they used to be, and generally in better shape than back in the 1990s at the time of the Asian crisis."

Emerging markets

Image caption Strength in Indonesia cheered investors

The reason why this clutch of countries did well is that investors have been investing by region rather than by sector or industry.

Mr Ganske says that emerging market investment is very different from investing in developed economies.

"First you have to be comfortable with the microeconomic and political environment," he says, "and then you buy across the index rather than picking individual stocks."

In particular, the region has been helped by strong trading links with China, where the stimulus package of half a trillion dollars still has some way to run.

Strong gains

There have been other little bursts of excitement in emerging equity markets.

Mr Ganske points out Ukraine as a particularly good example.

Its market fell in line with the developed economies this last month, but since the start of the year it has gained 40%.

"It went through a disastrous period, economically and politically," says Mr Ganske

"It had a dysfunctional parliament with a grid-locked prime minister and president. Now they are working well together and the economy is on the right path."

Estonia, Lithuania, Latvia and Iceland all saw rising stock markets last month and Estonia has seen a 40% gain since the start of the year.

Common mistake

Image caption Investors had a hard time in August

Now, there are two things going on here.

First, there are some fundamental improvements in these economies - nothing spectacular, but enough to give some stability, which meant there was some value to be had in the market against the zero value during the crisis.

Second, there has been a weight of money looking for a home, which has driven up prices. Whether they have been driven up above and beyond their fundamental value is a moot point.

But Mr Ganske believes that if the world avoids the dreaded double dip, investors should start looking elsewhere for growth. Better value, he thinks, will be found in developed markets.

"It is the mistake that everyone makes," he says.

"When the global economy starts to recover, they often double up on their holdings in emerging markets when in fact there is better value to be had in the developed ones.

"You should certainly hold your developing stocks in the recovery, but there will be better growth opportunities in specific stocks, well placed for a recovery in US and European markets."

All this is as we grope in the twilight world between recession and recovery, where our future is still painfully uncertain, and yet where it is good to know that there are a few flickers of growth.

If you know where to look.