Monday, August 26, 2013

China and Emerging Markets Recover

We have been following the recent volatility in emerging markets attempting to discern if the two month rally is ending and the answer seems to lie within the confines of the Federal Reserve.  Last week’s taper fears have subsided with weak home sales and disagreement among central bank governors.  So as the Carpenters sang, it looks like we’ve only just begun. 

It has been all white lace and promises for the SPDR S&P China Fund (GXC) getting all 10 Green Diamonds for the 18th time since July 12th and 15 of the last 17 days.  It has gained about 8% in those 6 weeks that the US market has lost about 1%.  Performance like that certainly earns its 1st place rank and the iShares FTSE/Xinhua China 25 Index Fund (FXI) has earned its 3rd place rank by performing as well despite scares last week.  Scores are similar to when we highlighted both funds last Wednesday with the exception of better Behavioral Scores today resulting from higher volatility readings.  That volatility knocked a couple of broader emerging markets funds out of the top 10 but the Powershares BLDRS Emerging Markets 50 ADR Index Fund (ADRE) has come back to 4th place today and their S&P Emerging Markets Low Volatility Portfolio (EELV) has come back to 6th.  EELV was also covered Wednesday with almost the same scores except for its higher Behavioral Score today on the same uptick in volatility.  We mentioned ADRE a few times in July and early August but haven’t highlighted its more balanced scores with 67.9 on the Behavioral side along with its better 78.4 Fundamental Score.  Short interest, implied volatility and short and intermediate term technicals all drive the Behavioral side while the Fundamentals are driven by 98 in both cash flow and book value scores.  3 of the 4 ETFs have Red Diamond Risk Ratings above 5 with EELV coming in below average at 3.49, as its name would suggest.

With so many roads to choose from, Quant helps us share horizons that are new to us and we will watch the signs along the way here at ETFGsm Daily Perspectives.   Those signs say the emerging markets still have room to grow and yes, we’ve just begun.  Even before the Carpenters began to sing, a pioneering woman was elected to membership in the NYSE, more than 45 years later we wish Muriel Seibert peaceful eternal rest.

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