"Investors are increasingly bearish on emerging markets, according to a Société Générale survey.
Over the next three months, we now have 51% of total investors being bearish on GEM, which is more than a month earlier (46.9% in May), and more importantly the largest percentage ever recorded. In addition, the group of bullish investors has been cut, with 39.6% of total investors being bullish on GEM over a 3-month horizon. Worryingly, there were now 56.3% of total investors that saw a deterioration of the GEM outlook over a 3-month horizon, relative to the short term. Meanwhile, there were only 27.1% of total investors that were more bullish on a 3-month horizon than for the 2-week outlook, which suggests that a fairly large number of investors thought that the GEM correction would be long-lived."
I am slowly adjusting my long term 401k allocation toward more emerging markets. Minor trading in EWZ. Personally, I prefer to have segments that are not 100% correlated and going up like was the case for a few years.
""I am slowly adjusting my long term 401k allocation toward more emerging markets. Minor trading in EWZ. Personally, I prefer to have segments that are not 100% correlated and going up like was the case for a few years. ""
Good post. Ermerging markets are volatile and when they are down is the best time to buy them. Indonesia was hot in the 90's but by 2001 IF a closed end fund was de-listed from the American stock exchange for trading under $1 and started trading on pink sheets. By 2003 it was back trading on the NYSE and by 2008 hit $14. EM's go from euphoria to crisis quickly as in 1997. In 1986 the entire Philippine stock market cap was less than $500 after falling 75% from the all time high in 1980. PLDT ticker PHI their phone company had a market cap of just $40 million and today it is $14 billion. You are right to trade the ETF's or closed end funds vs the adr's.
"You are right to trade the ETF's or closed end funds vs the adr's." I was looking at VALE but it scares me to go with a single EM stock. EWZ is not bulletproof but I am playing with it a bit. I agree with Aapl bellow that commodities are good proxy for EM. The issue I had there was that most ETFs I looked at were not all that corrected (XLB). So I played with FCX. With regard to TCK and PAAS they seem good but they are Canadian so I am not sure how currencies would affect those (I am expecting US to strengthen a bit more)
Looks to me like a lot of commodities are a pretty good emerging market proxy. Covered call strategy on some of these might be strikingly lucrative. I started ones on TCK and PAAS about a month ago. 4% yields (which could obviously go away at some point), massive premium on the calls. If they can hang around even close to this level the effective yield is going to push 20% annualized. If they crash further, they're crashing from a pretty depressed level, I'd probably add to the positions.
Basically what I think the survey is telling us is a fair amount of emerging market carnage is priced in to the stocks.