Entering text into the input field will update the search result below

Emerging Markets: Upcoming Information Technology Sell-Off?

Jul. 10, 2017 2:30 PM ETBABA, TSM, EEM, SSNLF, TCEHY, IXN
Andrii Taranukha profile picture
Andrii Taranukha


  • Since the beginning of the year, growth in Emerging Markets has been driven by the information technology sector.
  • The four largest holdings in the Emerging Markets ETF - SATT have a similar problem as FAAMNG in the S&P 500.
  • In the next few weeks, a sell-off of the SATT equity can be expected, following the sell-off of the FAAMNG.
  • SATT and the information technology sector have strong forecasts and fundamentals which means that a sell-off may be needed as a correction before the new highs.

Globally, the information technology sector is one of the best performing sectors. The sharp increase in the price may lead to the conclusion that the sector is overvalued, resulting in a sell-off.

I view the possible sell-off as a correction and a potential buying opportunity for either iShares MSCI Emerging Markets ETF (TICKER: EEM) or SATT stocks based on the strong forecasts, fundamentals and analyst recommendations. SATT, which includes: Samsung Electronics (OTCPK:SSNLF), Alibaba (TICKER: BABA), Tencent Holdings (OTCPK:TCEHY), Taiwan Semiconductors (TICKER:TSM).

In this article, I will explain why the upcoming sell-off is a correction and a buying opportunity.

Since the beginning of the year, global equities have had outstanding performance. The MSCI Emerging Markets Index (MXEF) outperformed both the S&P 500 Index (SPX) and MSCI World Index (MXWO).

Source: Bloomberg Terminal

The largest sector in SPDR 500 Index ETF Trust ETF (Ticker: SPY) is information technology which is around 22.22% of the entire portfolio. The largest holdings of SPDR 500 Index ETF are FAAMNG stocks, which includes: Facebook (Ticker: FB), Amazon(Ticker: AMZN), Apple (Ticker: AAPL), Microsoft (Ticker: MSFT), Netflix (Ticker: NFLX), Google (GOOG) (Ticker: GOOGL). FAAMNG stocks drove the performance of S&P 500 Index and the technology sector.

The recent FAAMNG sell-off had a significant impact on the technology sector and the S&P 500 Index. While some investors see the sector as overvalued, others see the sell-off as a correction and as an opportunity to buy.

The Emerging Market ETF, iShares MSCI Emerging Markets ETF, which follows the MSCI Emerging Markets Index, has a similar problem: information technology makes up 26.56% of the portfolio. The largest top 4 holdings of the iShares MSCI Emerging Markets ETF are SATT.

Source: Bloomberg Terminal

Fundamentals of iShares MSCI Emerging Markets ETF and iShares S&P Global Tech ETF (IXN). Source: Bloomberg Terminal

  • Based on

This article was written by

Andrii Taranukha profile picture
Passed all levels of CFA program and may be awarded a charter upon competition of the required work experience , analyst

Analyst’s Disclosure: I am/we are long EEM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.