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Thursday, August 13, 2015

Emerging Markets...This May Surprise You

The headlines of the past two months have been all about the "bursting of the bubble" in the Chinese stock market and more recently the impact of the Chinese currency devaluation announced this week.

I have written on a number of occasions that the term emerging markets has little usefulness since the countries that fall withing that category (and indices) are so diverse. China obviously has its own dynamic and in my view actually falls into a category of its own since it is an economy that can have great impact on emerging markets but the impact of those other emerging markets on China is limited.

Additionally the Asian non China emerging market countries have far different economies than those of Latin American countries, most of whom are dependent on commodity exports.

So looking around the emerging markets this year it is the Latin American emerging markets that have performed most poorly even worse than the Chinese A shares the epicenter of the Chinese stock market bubble bust.

Below are year to date  returns (growth of $100,000 top) returns and standard deviation bottom For emerging markets (VWO), Latin America (ILF),Emerging Asia (GMF) and China A shares (ASHR).I think many would be surprised that even after the bursting of the bubble. ASHR is not only the only one showing a positive return,.it's return is 7.4% almost 3 x as large as the S+P 500's 2.6%

Growth of $100,000 Year to Date

ASHR (gold) ILF (blue) VWO (black) GMF (green)

Total Return (top) Voaltility (bottom)

And here is the same data for the last 3 months even during this period of a 16.7% drop in the Chinese A Shares (ASHR), the Latin America fall was more severe -18.7%

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