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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.
http://www.bloomberg.com/news/articles/2015-09-30/buy-emerging-market-stocks-as-pessimism-peaking-barclays-says

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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