U.S. Markets closed

Emerging Market Retail ETFs Are Trending Downward

Mark Jonker

Rate Hike Speculation and China Drag Down Retail Sector ETFs

(Continued from Prior Part)

Simple moving average

Emerging market ETFs have been declining over deflationary pressures in the markets. The high downside volatility seen in stocks of emerging markets have made investors think twice before investing in these markets. Consumer discretionary ETFs such as the Global X China Consumer Growth ETF (CHIQ), the EGShares Emerging Markets Consumer ETF (ECON), and the Global X Brazil Consumer ETF (BRAQ) have all been trading below their 100-day moving averages as well as their short-term moving averages as of November 9, 2015.

As you can see in the above graph, ECON has been on a downward trend along with all the other emerging market consumer sector ETFs.

Relative Strength Index

The Relative Strength Index (or RSI) is a momentum indicator that indicates an overbought or oversold market for a stock. The index indicates an overbought position if it reaches 70, whereas a level of 30 indicates an oversold position. Let’s have a look at the 14-day RSI for ECON.

The above graph clearly shows that selling pressures have been developing in the EGShares Emerging Markets Consumer ETF (ECON). It’s a similar case for the Global X China Consumer ETF (CHIQ), whose 14-day RSI fell from 68.2 to 57.7 after the macroeconomic releases around the globe. The Global X Brazil Consumer ETF (BRAQ) and the iShares Global Consumer Discretionary ETF (RXI) also saw its RSI level fall on Monday, November 9.

Let’s look at single stocks. Alibaba Holdings (BABA) fell 2.7%, Ambev (ABEV) fell 3.0%, and JD.com (JD) fell 3.2% on November 9.

 

Browse this series on Market Realist: