Emerging Markets Last Week: Commodities Get Defensive

Includes: OGZPY, PBR, VALE
by: Emerging Money

By Tim Seymour

While some still see commodities like oil naturally rising higher than anyone now expects — at least in the long term — the commodity markets spent much of this week reeling, taking emerging stocks with them.

Copper remained a major focus, but ended the week completely unchanged. And as the European debt crisis flared up again, the dollar’s rally continued — but not without sudden reversals.

Brazilian stocks sank 1.7%, largely on weakness in the country’s biggest commodity stocks. Petrobras (NYSE:PBR) sank 3.9% and Vale (NYSE:VALE) plunged 4.4% as traders fled signs that China may be tapering off its once-massive commodity imports.

Stocks in Russia plunged another 3.6%, largely due to the flight from commodity-oriented names like Gazprom (OTCPK:OGZPY). Nonetheless, at this point some now see Russia as a bargain play, or at least undervalued.

India, stocks were almost completely unchanged as traders shifted from fleeing what they see as elevated inflation risks and into a new appreciation of the robust domestic economy. Car sales remained a key way to play the thriving Indian consumer story. Phone stocks were not.

Chinese stocks also ended the week flat. On the one hand, the latest inflation numbers coming out of Beijing indicated that price pressures are alive and well even as industrial activity cools. But as commodity prices declined, the oversold Shanghai market paradoxically got a bit of a boost on hopes that at least external pressures would ease. And in the middle, Internet stocks remained extremely richly priced.