Finance Friday: Despite Global Rebound, Two-third of Shareholders still to offset Recessionary Losses!


Isn’t rebound equal to the recovery? Not really! Read on…

The rebound in the market valuations in the global markets in 2009 has not turned out to be an all-inclusive recovery around the sphere. Despite impressive gains registered during 2009, the total shareholder returns (TSR) from two-third of the large-cap global companies are still reeling under pressure.

Only about one-third of the large-cap companies around the globe have recouped their downturn losses to generate net positive TSR for the period 2008-2009, a study by the Boston Consulting Group involving 2000 companies across 37 countries.


The study found that the top value creators in 2009, out of the sample of 182 companies, the top ten companies generated TSRs of between 126 and 269%.

However, here comes the point of climax, where the finding suggests that not all of the above top ten companies could recoup their entire 2008 losses despite heavy gains registered during the rebound phase.

Since most of these top companies were biggest losers during 2008, their TSR for the year 2009 are not enough to recoup their entire losses. Hence, the study points out this lagged phenomenon as the Rebound effect rather than a complete Recovery.

Interestingly, only four companies in the top ten –, Apple, Ambev and Rosneft – registered enough gains in 2009 to recover all the 2008 losses.

Accordingly, from the sample list of 182 companies roughly one-third of the global companies could recoup their previous year losses, while others are still said to be in negative on net TSR basis.

The study points out that emerging market such as Russia, China, Indonesia, Brazil and Argentina generated the highest returns while developed markets like the US and Germany has a much weaker rebound. Only Argentina, Brazil, Mexico, SA, and Turkey among the list of 40 sample countries generated enough value to recoup 2008 losses.

The Mining sector has come out with flying colors with an average TSR of roughly 125% which managed to offset its negative TSR of 46% in 2008 a best performing sector among various other industries such as food, beverages, tobacco & alternative energy space.

We have a similar story to narrate in Indian context too. Take, for instance, the Automobile industry which was worst hit by the lack of consumer demand and tightening credit, rebounded the most in this recovery phase.

As soon as recovery was sniffed on the horizon the guzzling industry witnessed a strong turnaround on the back of unwinding of the suppressed demand on the sight of a slightest rebounding clue.

However, some of the domestic sector such as Airlines and Telecom which had witnessed a fall in their valuations during the recession has still not offset their earlier losses.

In fact, telecom sector is still yielding negative returns and is perched at the same old trough levels on the back of stiff price wars. Even the prevailing lucrative valuations in the sector are not attracting investors. The fear of further erosion in earnings if price war persists in the over-crowded market is keeping investors at bay as of now.

Do you feel that the rebound can be sustained for long after such a deep crisis?

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