Trump´s blame the Fed game continues as we await the G20 meeting to take place. While developed world seems occupied with Trump´s latest tweets, the recent bullish sentiment in Asia continues. We have been outlining the logic regarding the Emerging Markets/Asia bullish sentiment over past weeks.
One of the reasons leading to the October sell off in developed world has been the “fragile” EM sector. According to us the EM space reversed weeks ago, and is now outperforming. If the EM space “took us” lower, why not acting as a catalyst the other way as well, should it continue to move higher.
Hong Kong continues trading well, but very few talk about it. Only a few weeks ago media was bashing about the HSI being the dog of Asia. Note the recent break above the trend line as well as the 50-day average. The HSI index is up 9% from recent lows and people are still talking negatively about it.
The Emerging markets main ETF, EEM US, is up 8% from recent lows. The longer-term trend is still intact, but this is a space to watch carefully. Should the negative trend be taken out, a violent squeeze could be taking this space higher. Watch a possible close above the 50 day for clues.
The Chinese main ETF, FXI US, is up 9% from recent lows, but people still love talking about the bearish China set up. The negative trend is still intact, but watch a possible close above that big trend line. Most people still hate this space, and they all know China is a “fundamental” short, but if timed well, moves higher in the FXI US can be very big.
Below is a monthly chart of South Korean exports YoY. We showed this chart a few weeks ago, but would like to remind you about it once again. Needless to say, South Korea is an extremely important puzzle for the Asian/EM sentiment.
From a conversation with one of the sales traders at a US bank yesterday where he asked us:
“Why do you go on about Tencent?”
We have been arguing Tencent as being one of the more important names to watch, both for the global Tech space as well as the EM space. On the way down, this was one of the most hated names and was a great risk indicator for the entire space. As the stock started catching bids a few weeks ago, we have been pointing out that Tencent should be watched closely as it might offer clues the other way as well, both for Asia/China as well for the developed world.
After a brief conversation we asked the sales trader to look at the Asian chart of Tencent. The reply was;
“…what´s the Bloomberg code?”
Our take is, maybe not statistically significant, if a senior sales trader doesn´t even know the code for a stock as important as Tencent, it probably reflects the aggregate ignorance of the average guy on Wall Street.
It is important looking beyond the normal.
Below is the chart of Tencent we have been bashing on about over past weeks. Note the massive move above the negative trend line. The stock is up 25% from recent lows and market cap is the same as Facebook. Tencent is the biggest component in the EEM US (4.5%) and the second biggest in the FXI US (8.3%).
Not watching Tencent as a sentiment indicator is pure ignorance, and we all know:
“Ignorance is bliss…”
Source; charts by Bloomberg
