Emerging Markets have taken a real beating this year, but most of the space has enjoyed some nice bounces lately. We have been pointing out both EM FX as well as EM stocks for a few months.
The rebound is still timid, but as fundamentals, as well as the technical picture start improving, investors could start flocking to a “quick” turn around story.
The JPM EM FX index is continuing the recent bounce move and is currently just at the big negative trend that has been in place since March this year. Note the 50 day average right here as well. Last time the index closed above the 50 day average (ok the set up was different) the EM FX index rallied 5% in a few months.
Fundamentally not much has happened in terms of the economy improving, but we have seen Turkey finally give in and rising rates, followed today by both Indonesia and the Phillipines raising rates. Argentina has on the other hand had improved dealings with the IMF.
Trade wars are still very much alive, but several pundits have been pointing out this being a great time to buy debt across the EM space.
JPM EM Bond ETF above the 50, 100 day averages as well as trading above the negative trend.
The Turkish Lira has been gaining lately as well. It trades at multi week highs. The 6 level is huge.
The Turkish equity ETF (TUR US) is up 24% from recent lows.
Earlier in September we outlined that the EEM US had sold off hard but was trading right at August lows, the 41 level, and suggested the brave trader could try a nervous EEM US long. The EEM US is 6.5% higher from recent lows and the ETF spikes above the 50 day average today. Note the move above the longer term negative trend line.
Source: charts by Bloomberg
