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Thursday, October 1, 2015

Emerging Markets a "Favorite" Place for Performance Chasing Investors

Emerging markets are a sector of extreme volatility, In a bit of a dysfunctional self reinforcing cycle the volatility causes performance chasers to buy high and sell low which in turn exacerbates the moves. Historically this performance chasing is a recipe for terrible long term performance.

Here is the recent data on emerging markets flows:

Traders dumped exchange-traded funds tracking emerging-market stocks at the fastest pace in over a year last quarter amid concerns over the slowdown in China, a selloff in commodities and the prospect of higher interest rates in the U.S.
Investors pulled $6.1 billion from U.S.-traded ETFs that offer exposure to a basket of developing-nation equities in the three months through September, the most since the first quarter of 2014, according to data compiled by Bloomberg. Exchange-traded funds that invest in both emerging-market stocks and debt as well as individual countries saw outflows in 12 out of 13 weeks ending Sept. 25, with losses totaling $12 billion, the data show

Bloomberg reports on an interesting analysis which concludes that as in the case in many areas of investing buying the most unloved assets produces the best returns.

A buy signal seen only four times in the past 12 years is flashing again in emerging-market stocks, according to Ian Scott of Barclays Capital.
Things got so bad, they’re going to turn around, according to the London-based equity strategist. In the worst quarter for equities in four years, money flows in emerging-market funds are trailing developed nations by a degree unmatched except in 2004, 2005, 2008 and 2014, Scott says, citing EPFR Global data. Yet on every one of those occasions, shares outperformed developed markets by at least 9 percent in the following six months, he says.

1 comment:

CapitalStars Financial Research said...

Nice Post and graphical news shearing by you.....keep it up
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