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By Tim Seymour

For emerging markets it's been "Sell in May and go away," but most didn't see this coming despite all the historical references. So while the U.S. is +3.2% in May going into the last day of the month and Germany (NYSEARCA:EWG) is +4.5% (in USD terms), emerging market equities have been torched with much of that move coming from the forex. As we and point out all the time, when you are playing emerging market equities the currencies are often more than half of your return profile.

If you don't get your forex right, you are dead. That was never truer this month than in South Africa (NYSEARCA:EZA) as the headline JALSH Index is +7.6%, but the currency is -11.8%. That leaves you -4.2% on the month. Brazil (NYSEARCA:EWZ) is -7.6% going into the last day of the month. Even India (NASDAQ:INDY), with its strong returns locally, has returned -1.8% when you convert it to USD terms. In other words, if you are an ADR holder and sit in USD, you are losing money even though the local market is higher. This has been a quietly dangerous month for emerging markets in a quietly dangerous year.

In 2013, emerging markets are -3.5%, and if you chased the market after the Jan. 2 rally, you are down 7%. Anyone who has traded emerging markets in the last decade is well aware of the seasonal trade. May is often awful, and June is often worse than May.

Source: For Emerging Markets, It Has Been 'Sell In May And Go Away'