Sub-Merging Markets

January was a tough month for stocks, with the Dow falling by over 5% and the Nikkei, everyone’s favourite of late, diving by 8.5%. The newswires have, in the main, put it down to the turmoil going on within the developing economies, better know as Emerging Markets.

We are not so sure that is correct, as a quick glance at the iShares MSCI Emerging Market ETF shows.



EMs actually peaked way back in 2011 and as can be seen from the lower blue line, the emerging brethren have actually been under-performing the developed markets ever since. So it’s not exactly new news.



There has also been recent talk about sliding emerging market currencies, but again as can be seen above, which is the WisdomTree Emerging Currency fund, the run on their currencies also commenced back in 2011, albeit that it is only recently that policy-makers have hiked interest rates in a futile attempt to defend them, slowing the respective economies further.

Both Emerging Market stocks and currencies are at an important juncture. Kindly note that within the currency chart, important support, as per the dashed-green-line, has been breached, so unless this can be regained immediately, it suggests far weaker currencies are in the offing.

Returning the Emerging Market stocks, note that the red-line support gave way last month, since when the index has dropped by a swift 5% before a slight recovery over the past day or so.



Furthermore, the longer-term red-support line shown within the first chart is in danger of being breached, which would open the way to a fast 15% or so fall to re-test the low of October 2011.

Sub-merging markets seems a more fitting anachronism these days.


2 responses to this post.

  1. […] and the emerging markets asset class, including that of the BRICS, which can be found in “Sub-Merging markets,” and “BRICwall […]


  2. […] markets/BRICS: Late January’s “BRICwall Cracking” and February’s “Sub-Merging Markets,” reminded that both sectors had been heading lower since their 2011 highs and of their close […]


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