Best returns in resource-based countries

Through two world wars, the Great Depression and relentless redrawing of national boundaries since 1900, one group of countries gave investors the best stock returns.

Commodity- rich nations such as South Africa, Australia, the U. S. and Canada enjoyed buffers against global turbulence because of their natural resources, but have developed their economies to rely on newer industries such as financials, technology and services, according to a joint study by Credit Suisse Group AG and the London Business School that scanned data going back 117 years.

The study shows that no single industry can provide a lasting competitive advantage. In 1900, more than 80 per cent of the U. S. stockmarket’s value was in businesses such as railroads, which are today small or extinct.

Nearly half of U. K. companies by value are in sectors that didn’t exist a century ago. Gold, once key to South Africa’s wealth, has waned in importance and the biggest Australian companies are now banks.

South African stocks have returned an average 7.2 per cent, more than two percentage points above the global average and the most among 23 nations tracked by Credit Suisse and LBS. The nation is Africa’s biggest coal and ironore producer, and the world’s largest of platinum, manganese and ferrochrome.

“South Africa performed well partly because it is a resource- rich country that has successfully developed into a broader diversified economy, and because it has made a peaceful transition from apartheid and remained stable,” according to researchers including Prof. Paul Marsh of LBS.

“Because it has performed well in the past, however, t his does not mean it will continue to be a world- beating performer over the next century,” Marsh added.

Denmark tops the list for bond returns with an average 3.3 per cent. Equities were the best- performing asset in e ver y country, showing over the long run there has been a reward for higher risk.

Investors lost all their money i n Russia in 1917 and China in 1949 because of revolutions. Japanese stocks, the world’s secondbest equity performers from 1900 to 1939, lost 96 per cent of their real value in the Second World War.