Last year's losers, this year's winners? While we started this exercise of looking at how often last year's losers became next year's winners more out of curiosity in our report of 5 January, Last year's losers - this year's winners?, we continue to be surprised at how often "mean reversion" occurs. We define "mean reversion" as how often the four worst performers in one year end up being among the four best performers the year after. Figure 1 highlights that two of the four worst performers in 2015 (namely Thailand and Indonesia) are the best performers in 2016 YTD. Significantly, three of the four best performers in 2015 (namely Japan, Hong Kong, and India) are among the four worst performers in 2016 YTD.

　　"Mean reversion" working at sector level as well. Figure 2 highlights that two of the four worst performers in 2015 (namely Energy and Materials) are the two best performers in 2016 YTD.

　　Do we have to wait until 2017 for Thailand and Indonesia to underperform? We hope not, but Figure 3 highlights that Thailand and Indonesia have for each of the past four consecutive years gone from worst to best to worst to best performers. More seriously, we believe foreign investor capitulation in late 2015 was a key driver of Indonesia and Thailand's outperformance. And as highlighted in our reports on foreign buying on 12 and 18 July, net foreign buying in Indonesia has moved from -1% to -0.1%, and in Thailand from -1.3% to -0.4%.