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With hedge fund manager, CNBC regular and long-time veteran of the Russian markets Tim Seymour at the helm, Emerging Money ( provides education, trading analysis and comprehensive views of emerging markets around the world. As economies in the BRIC group and beyond... More
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  • Emerging markets flows still strong
    Expect to see emerging markets funds bring in over $30 billion in the current quarter, easily cracking the old 2006 record flows into this asset class. This is still a bullish sign.

    As the world’s capital keeps pumping into emerging markets, we have already seen $3.4 billion come into funds that give investors a way to access these robust economies. At that rate, this quarter will easily outpace any other three months on record — assuming, of course, that the trend continues for awhile.

    While some say strong flows become a negative technical indicator if they continue “too long,” the fact is that they do not seem to have gone on too long yet. In fact, the idea that too much money crowding into an asset class is only bearish confirmation if sentiment is bearish already — otherwise, it simply indicates that investors are still piling into these funds, which we would ordinarily call a “bull market.”

    Where is the money going? Old faithfuls: Brazil and China, both of which have been a bit bruised or even battered in the recent correction.

    Latin funds are hotter than they have been since October, outpacing Asia-dedicated funds last week by a significant margin and drawing in more than twice as many dollars as even the hot Russia driven CEE/EMEA group.

    But the king is still the “emerging markets” asset class itself. Global funds like EEM took in half of all emerging markets flows last week — a total of $1.7 billion in net allocations.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 07 12:50 PM | Link | Comment!
  • Tombini takes a “velvet glove” approach
    Despite anticipation that new Brazilian central bank chief Alexandre Tombini would shake things up at today’s short-notice press conference, the real news stole his thunder.

    By the time Tombini got to the podium at noon today, all the wires could find to print was a short notice that Brazil under his monetary direction will remain “open to foreign capital.”

    It was an unexpectedly cooperative note to strike when traders were expecting Brazil’s newly minted top government banker — an appointment of incoming president Dilma Rousseff — to unleash some thunder and maybe even a little lightning on the currency markets.

    However, while Tombini seems to be playing the “velvet glove” as Brasilia struggles to get the high-flying real back down to a comfort level, finance minister Guido Mantega was tightening the iron fist.

    Mantega has emerged as the hawk in Dilma’s administration, having vowed previously that the government could tap unlimited resources to keep the real from getting any stronger.

    Today, he announced that financial institutions who want to go more than $3 billion short on the dollar will need to keep 60% of the value of their positions in reserve — a move designed to discourage what has become a big business of betting against the greenback in Brazil.

    As of now, Brazilian banks are a net $16.7 billion short on the dollar. By April 4, when the new rule goes into effect, local analysts expect about 40% of that net short position to unwind. As it happens, that would only free up enough cash to cover the new reserve requirement, so it remains to be seen how effective the move will be.

    Obviously, a policy like this aims to strengthen the dollar’s relative appeal for Brazilian institutions and so help sap a bit of demand out of the otherwise too-strong real, and by extension, funds like BRF

    In practice, it also resolves questions about whether banks that have been playing too hard in the currency markets are risking another implosion.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: BRF
    Jan 07 12:43 PM | Link | Comment!
  • DXY rally looks like it might hit a wall

    Although the dollar is surging thanks to the new tone on the U.S. economy, the technical picture indicates that the gains may be topping out soon.

    DXY is a crowded trade right now, rising on general sentiment but it looks like there are only a few more days — at most — here before the recent thrust takes the dollar index up into some pretty heavy overhead resistance.

    It does look like DXY will ultimately respect the 20-day moving average, which is currently trending at around 80. If anything, right now the DXY’s current level of 80.40 looks a little overbought beyond the short term.

    But in that short term, a reasonable top to look for would be 80.75. It is fairly unlikely that we will see it hop up beyond 81.70 — where the hard 200-day resistance is — in any event.

    We might get real job creation tomorrow to keep the sentiment running high, but unless the big boys truly are unwinding USD/CHF or USD/JPY trades, the dollar may not get much stronger from here. This, in turn, would make it safe to take another look at your commodity and emerging currency trades.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 07 12:40 PM | Link | Comment!
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