International small-cap companies were the driving force behind strong gains for developed world equity markets in 2004, says ratings agency Standard & Poor’s.


According to S&P’s monthly review, The World by Numbers, the S&P/Citigroup BMI developed world index rose 16.9% in U.S. dollar terms in 2004, helped in part by a 3.93% return for the index in December.

“In 2004, there were several factors working in favor of equity markets,” says Nicholas Aninos, analyst at S&P. “Adding to the strong returns were a U.S. economy gradually beginning to pickup steam, low inflation arguably being held in check by intense global competition, and a favorable interest rate environment.”

The S&P/Citigroup Global composite returned 4.02% in December to cap off a 17.28% gain for the index in 2004. In addition, all of the major regions posted gains for December and each finished 2004 in positive territory. In December, the Asia Pacific region led all developed world equity markets by posting a 4.58% gain with Europe (+4.38%) and North America (+3.53%) following closely behind.

For 2004, Europe came out ahead of all developed world markets, returning 22.80%. Asia Pacific returned 20.72% for the year, and North America came in at 13.19%.

For 2004, small-cap companies (under US$2 billion) finished ahead of the large-cap companies across all developed regions. The developed world small-cap companies retuned 25.07% in 2004 versus 13.27% for large-caps.