Tiho Brkan of TheDailyGold.com takes a technical look at how emerging market equities
have been performing and whether now is the time for global fund
managers and asset allocators to shift capital from expensive Developed
Market equities towards laggards.
Chart 1: Could emerging market equities break out in coming quarters?
Source: Short Side of Long
Emerging Market equities have under performed Developed Market
equities for years now. Slowing economic activity, falling export
growth, over-leverage, inflationary pressures, and geopolitical tensions
have plagued various regions and countries within the index. Since
early 2010, the MSCI Emerging Market index has basically gone sideways
while US equities have risen to record highs and become extremely
expensive on historical basis.
Chart 2: Emerging Asia equities have already broken out to the upside.
Source: Short Side of Long
The question now is, could global fund managers and asset
allocators shift capital from expensive DM equities towards laggards?
GEM equities have now approached a major resistance zone, after making
no progress since at least 2007. It seems that a breakout could be at
hand in coming quarters, especially since Asia is already leading the
way higher.
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