By Chris Becker
Today I want to take a closer look at some lesser followed stock markets, particularly those outside the normally quoted bourses on the evening news, and where more opportunities are likely to be found, as the liquidity rush to find yield around the world quickens.
While the MSCI EAFE (Europe, Australasia, Far East) Index has been tracking the S&P500, other emerging markets have not experienced those relative gains:
This is interesting given growth rates for EM markets have surpassed that of the anaemic developed world – from LPL:
And valuations using price/earnings (P/E) ratios are definitely softer:
So let’s look at some of these markets for some opportunities.
The Brazilian Bovespa Index (BVSP) has been in a structural downtrend since mid-2012 but looks set to breakout above 55000
India
The Hungarian Index (HTX) could be following the same pattern as the FTSE MIB (Italian index) which had a similar base before expanding recently:
Meanwhile the Indian Sensex Index (BSE) has had a parabolic rise in recent months, which looks considerably overbought:
All of the above can be accessed via CFDs (contracts for difference) but for the un-leveraged investor, ETFs (exchange traded funds) are available, e.g. the iShares MSCI Emerging Markets (IEM) (compared to the outperformance of the S&P500)
Or specific stock index ETFs, e.g the iShares MSCI Singapore (ISG) which closely tracks the Singapore Strait Times (STI):
The risk on/risk off meme since the GFC, and reinforced by successive waves of QE and other stimulus, still applies within the developed world markets and the ramification are closely, but not exactly felt in emerging markets.
It pays for investors to look further than the usual suspects, maybe not for a bulk of allocation, but at least some diversification away from what seems one single central bank goosed stock market.