How Much Weaker Will Emerging Market ETFs Get?
12 May 2011 at 6:23 pm by Gary Gordon
The latest weekly data from the Investment Company Institute? Money market fund inflows exceeded $24 billion. That represents the largest weekly increase since December.
The lion’s share of the jump came from institutional shifts. No surprise there… money managers have been raising their cash levels in anticipation of a highly probable pullback.
Nevertheless, U.S. stocks remain resilient. The S&P 500 is a little more than a percentage point off of its April closing high of 1363.
In complete contrast, the iShares BRIC ETF (BKF) has witnessed an intra-day correction of -10%. It currently resides below a 200-day moving average. Considering the contributions of Brazil, India, Russia and China to global production and consumption, emerging market weakness is hardly welcome news.
Worse yet, a number of emergers have experienced “cross-under” events. Specifically, when the value of a short-term 50-day moving average crosses below the value of a long-term 200-day moving average, ETF traders typically assume that the ETF is trending downward.
Here are several unfortunate residents that have crossed under:
| The Emerging Market “Cross-Under” Club | ||||||
| 50-Day MA | 200-Day MA | |||||
| iPath India (INP) | 69.95 | 71.50 | ||||
| Guggenheim China Real Estate (TAO) | 19.47 | 19.57 | ||||
| iShares MSCI Peru (EPU) | 43.25 | 44.07 | ||||
| iShares MSCI Chile (ECH) | 72.77 | 72.97 | ||||
| EG Shares Small Cap India (SCIN) | 19.43 | 21.19 | ||||
| Market Vectors Vietnam (VNM) | 23.79 | 24.88 | ||||
| Global X Columbia (GXG) | 20.58 | 20.82 | ||||
| iShares MSCI Turkey (TUR) | 65.38 | 66.26 | ||||
Granted, many of the residents on the list are far out on the emerging spectrum. You might even say, they are more representative of the frontier.
Nevertheless, the dollar’s devaluation in 2011 hasn’t led to larger gains in frontier markets or emerging markets. And lately, dollar reversals on risk aversion only seem to hit the emergers even harder.
The iShares BRIC ETF (BKF) hasn’t “crossed” under. That said, its performance has been rather uninspiring.
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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.
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