As we enter the fifth year of a stubbornly persistent financial crisis, which seems to a great deal of the world to be a drawn-out catastrophe, what will be the market’s themes for 2012?

First, let’s take a quick look at the highlights from 2011. The dominant theme was political risk, with the highly publicised debt-ceiling debate raising the possibility of the impossible: a US default on its debt.

This, coupled with the country’s rising debt burden, led to the US losing its coveted Standard and Poor’s AAA credit rating. But the prospects of sovereign defaults in Europe – Greece, Italy and Portugal – shifted the attention to the euro zone and the potential dismantling of the currency.

The political instability, fears of a double-dip recession and declining investor confidence resulted in extremely volatile markets.

While the US markets are ending pretty much where they started, there has been this year a 20 per cent difference between the high and low for the Dow Jones Industrial Average. China’s Shanghai Composite index had a 30 per cent difference between high and low, while Spain saw a 33 per cent differential and Brazil a 32 per cent. Gold, now trading at US$1,608 an ounce, was one of the main beneficiaries as a supposedly safe haven investment. The precious metal hit a high of $1,916 an ounce and a low of $1,321 an ounce during 2011.

Despite the debt crisis in the US, Treasuries managed a bull run with the 10-year yield currently at 2.02 per cent, and the one-year yielding a paltry 0.11 per cent. The euro zone’s sovereign-debt crisis will continue to be a dominant theme in 2012, as there seems there is as of yet no imminent solution.

There is concern that besides bailing out countries, there may be a need to nationalise deteriorating banks.

The survival of the euro as a currency will remain a headline, although few believe that dissolution of the union is a realistic probability.

Remember when the euro was 1.60 to the US dollar in 2008?  During 2011, the high for the euro was 1.48, and it is presently trading at 1.30.

With the cost of the bailouts likely to accelerate, and anticipation that the European Central Bank will have to significantly increase money supply, the depreciation of the euro will remain in focus. Some of the most dire forecasts are calling for parity with the dollar.

This prospect calls into question whether the 10-year bull  run in gold will continue. From an average monthly price of $444 an ounce in 2005, the 2011 high represented a 341 per cent increase in six years.

Opinions are divided. Some experts say the dollar, benefitting from the euro crisis, will lead to a decline in the gold price. Others predict the flight from risk and low yields will add more mileage to the bull market.

As the US continues to avoid a double-dip recession and economic numbers remain positive, US equities are expected to have a good year.

In Cambodia, it is highly likely we will see our first listing on the exchange in the first half of 2012: the end of the beginning to the long road to the creation of capital markets.

Anthony Galliano is chief executive of Cambodian Investment Management.  [email protected]