Emerging Markets Lead Global Rally

How does the current stock markets rally look around the world? These ten charts show a global rally with more leadership in the emerging countries.

(click images to enlarge)

Charts shown are:

• VT: total world stock markets
• VTI: total US stock market
• VEU: total world ex US stock markets
• VGK: European developed stock markets
• VPL: Pacific developed stock markets
• EEM: Emerging stock markets
• EWZ: Brazil stock market
• RSX: Russia stock market
• INP: India stock market
• FXI: China stock market

The superior performance of the emerging markets is more clearly seen in the two following charts which plot percentage change instead of price. The first chart plots the world and developed markets against the S&P 500 weekly for six months. The second chart plots the emerging markets index and the BRIC countries against the S&P 500.

World and Developed Markets

Emerging Markets

Among the emerging countries, Chile (ECH) and Brazil (EWZ) have the most attractive chart patterns.

Chile

Brazil

While some other country funds, such as Taiwan, have gone up nicely during this rally, Chile and Brazil began their upward move well prior to the current rally. That gives us more comfort with them in the event that this rally fades. Both Chile and Brazil are important exporters of natural resources.

Comments

[Uppai Mappla:]

The article is interesting but has ignored a promising bull market—India. Elliot Wave International has identified India as a baby-bull and has predicted that Bombay Sensex might continue to advance for 15 years (something like Japan in 60s and 70s). There would be some uncertainty pending the elections due in May but after that the market would zoom up. As the famous write philosopher Aubrey Menen said, “Over many centuries Indians have produced nothing except some ideas.”
This is the age of ideas. Maybe the age of India?

Apr 10 03:34 AM

[QVM Group:]

Uppai Mappla -- I agree that India is interesting and promising. This article, however, is about those country funds with price patterns that have begun to realize their promise. India has not yet, as of the date of the article, made that showing.

Apr 10 08:38 AM

[Jan Tabak:]

Uppai Mappla - I read your comments and think your ideas have merrit. Can you give some tips how to invest practically as an European individual investor in the expected economic growth in India? I am more interested in ETF's and mutual (index) funds than in individual stocks. Is it easier to get a good exposure in India than the Chinese stocks (ETF's have limited number of stocks)?

Apr 11 07:38 AM

[Jan Tabak:]

Uppai Mappla - I read your comments and think your ideas have merrit. Can you give me a tip how to get exposure to the part of the Indian stock market that you expect will grow fastest? As an European individual investor with limited time I'd prefer ETF's or mutual (index) funds but if individual stocks are the way to go I'd acquire a basket.

Apr 11 08:16 AM

[The Good Ne...:]

Thanks Richard for these charts.

No doubt just the first leg of the new world bull. I've been following the daily Rasmussen Consumer/Investor confidence indexes closely in the past 6 weeks. They both continue to surge higher with no bearish movement since both rocketed higher 3-4 weeks ago...

mast-economy.blogspot....

If that psychology falters, then the rallies will too.... if those indexes keep moving higher, I can't see any significant dips on the near term horizon...

Thanks again for these graphs.

GNE

Apr 12 03:49 PM

[Uppai Mappla:]

Jan Tabak: I really don't know which sector will lead the next rally. Many say it would be infrastructure, but that sector has had a dream run and has been decimated already. Then there are autos and I am very positive on Tata Motors with a 5 year perspective.
Brokerages such as Indiabulls Securities, India Infoline and Geojit Financial Services have been beaten down more than their book value and so I am bullish on them. So are some of the smaller govt owned banks like Indian Overseas Bank, UCO Bank, Allahabad Bank etc which have a dividend yield of about 8%, with very little potential for capital erosion at current prices. Indian banks have not been affected much by the global meltdown but still they have come down in value drastically.

But for you I think the safest option would be to invest in an index based ETF in India, tracking either S&P NIFTY (50 stock index of National Stock Exchange) or Sensex (30-stock index of Bombay Stock Exchange. Over the last 5 years few actively managed mutual funds beat these indices. From March 9 to April 9, NIFTY rose 29.9%. There are two events to watch out for before you invest: (1) The national elections in May 2009 (2) the monsoon forecast which also should be out by May.

I suggest you wait till June 2009 to start investing when both these events will be over. Invest for the long term (2-3 year perspective)

Check out this article:
economictimes.indiatim...

Apr 12 05:43 PM

[Jan Tabak:]

Thanks Uppai Mappla!

Apr 22 12:12 PM