Seeking Alpha

Emerging market stocks enter bear market

  • The MSCI Emerging Markets Index (ETF: EEM) is off 22% from a peak set about three years ago, with the most recent slide coming as currencies tumble. Central banks have begun hiking rates to combat, with India overnight boosting its benchmark for the third time in six months and Turkey expected to take action today (an announcement is due at 5 ET). The South African central bank meets tomorrow, but a rate hike is not necessarily on the table.
  • As usual, the unwinding of an epic credit bubble in China and the effect on growth tops the list of fears. One trust product - the China Credit Trust - narrowly avoided default this week thanks to a mystery third-party rescue.
  • Buy the dip, says Ashmore head of research Jan Dehn. “There is some serious dumbing down going on in financial markets right now when it comes to EM. EM debt levels (especially external debt), EM’s general reliance on external markets, and EM’s reserve holdings have all improved beyond all recognition over the past 10 years.”
  • Loomis Sayles' Peter Marber: “Compared to 1998, emerging markets hold over $7T more in hard currency reserves to cushion themselves from market volatility. For most emerging markets, the problems today are nothing like the problems of the mid-1990s. Very few countries are near default, and those that may be are relatively small.”
  • Turkey and India ETFs: TUR, EPI, INDY, SCIF, PIN, INP, INDL, ICN, INR, INDA, SCIN, INXX, INCO, SMIN
  • EM ETFs: EEM, VWO, DEM, EDC, DGS, EDZ, EEMV, EEB, SCHE, EDIV, IEMG, DVYE, EEV, BIK, EWX, BKF, CEW, PIE, ADRE, HILO, EUM, FNI, EET, GMM, PXH, EEMS, BBRC, EELV, FEMS, EEME, EMDD, BICK, DBEM, EMCR, FEM, EWEM, EVAL, EMBB, JEM, EMLB, EEHB, TLTE, EGRW, FNDE, EMHD, EMSA, EMFT, EMDR, QEM, QDEM
Comments (3)
  • Is anyone worried that the taper, followed by increasing interest rates will create large headwinds for countries that generally focus on commodities and commodity products? It will eventually be a value play, but I'm concerned it's still too early!
    28 Jan, 12:20 PM Reply Like
  • Epic credit bubble. Where I have heard that before
    28 Jan, 02:11 PM Reply Like
  • there is nothing to worry about the "taper", the only way that US interest rates jump up is in the case of a massive sale of treasury bonds, and creditors China, Japan and Germany, and the main creditor Dr. Yellen none of them will sell right? so looks like an opportunity to go long some selected stressed EM assets to me. Just look a global corporation as Siemens earnings increasing significantly by 12% on organic basis growth all across the sectors and geographies. This was mainly due to a substantial increase of large and, in particular -- in part, multiyear orders in wind, transport and logistics. Key drivers were emerging markets growing 27% and accounting for 41% of the total order volume. China, for example, was up 23%, while emerging countries outside the BRICs delivered remarkable 40% orders growth !
    28 Jan, 05:36 PM Reply Like
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