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  • February 28, 2013
  • 2012 Equity Markets Show Signs of Sustainability

  • Clues Suggest Global Economy on a More Sustainable Pathway to Long-Term Value Creation, According to Research by The Boston Consulting Group

BOSTON, February 28, 2013—Global equity markets took a giant step forward in 2012, generating an average total shareholder return (TSR) of 18 percent. What’s more, the results reveal intriguing clues suggesting that the global economy may be at the beginning of a more sustainable pathway to longer-term value creation, according to recent research conducted by The Boston Consulting Group (BCG). The research appears in the online article Signs of Sustainable Value Creation that is being posted at www.bcgperspectives.com today.

Big Winners:  Emerging Markets and . . . Europe

BCG analyzed the 2012 TSR of more than 5,000 companies across 40 countries and 37 industry sectors. As one might expect, emerging markets delivered among the highest average TSR—with the big winners in 2012 being Turkey, South Africa, the Philippines, and Thailand. (See Exhibit 1.)

Click image to view larger.The big surprise, however, was the unusually strong performance of European equity markets. Five European countries—the Czech Republic, Austria, Denmark, Germany, and Poland—were among the top ten equity markets in the world. And 11 European countries, including Greece, Belgium, and France, generated TSR that was equal to or better than that of the U.S. S&P 500.

“The success of Central European countries, in particular,” said Frank Plaschke, a partner in BCG’s Munich office and a coauthor of the report, “may be a sign that ‘Germany, Inc.’ is successfully exploiting a new wave of export-driven growth, despite the fact that domestic German growth has fallen to a near standstill.”

Fighting Economic Headwinds

Another sign that at least some global companies are finding ways to deliver sustainable TSR is the regional balance of the top-ten large-cap value creators for 2012. (See Exhibit 2.) In contrast to 2011, when nine out of the top-ten companies were from the U.S., this year’s list includes companies from the U.S., Germany, Spain, Brazil, and Japan.

Click image to view larger.Although broad market trends have given some companies on the top-ten list a boost, many have clearly found a way to thrive in the current economic environment—often by leveraging global growth to fight the strong economic headwinds in their local markets. Examples include the Spanish retailer Inditex, the world’s top fashion retailer and owner of the Zara fashion brand; Brazilian beverage-maker AmBev;  Toyota, which has regained its position as the top global auto company in terms of sales; and Volkswagen, which has leveraged its strong presence in the Asian market to counteract sluggish growth in its European base.

“The presence of such companies on our top-ten list suggests that at least some global companies are finding sustainable pathways to create value through growth,” said Jeff Kotzen, a senior partner in BCG’s New York office and a coauthor of the study.

Traditional Economic Engines

One final clue comes from the comparative performance of the 37 industrial sectors in the BCG study. Sectors that include low-cost consumer-products companies (such as producers of personal goods and beverages) continued to do well in 2012, and hard-hit financial sectors such as insurance and banks enjoyed a rebound.

“But the relatively strong performance of traditional economic engines such as automobiles and parts, household goods and home construction, construction and materials, and general industrials suggests that a broader recovery may be under way,” added Eric Olsen, a senior advisor to BCG and a coauthor of the study.
 
To download a copy of the report, please go to www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About bcgperspectives.com

Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management’s agenda. It also provides unprecedented access to BCG’s extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm’s founder and one of the architects of modern management consulting. All of our content—including videos, podcasts, commentaries, and reports—can be accessed by PC, mobile, iPad, Facebook, Twitter and LinkedIn.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 82 offices in 46 countries.

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