Salient to Investors:
The MSCI Emerging Markets Index RSI touched 70, the level that signals a security is poised to decline. The last time it touched 70, on January 14, 2013, was followed by an 18% drop in 5 months. The Index breached its upper Bollinger band on Sept. 10, another bearish technical indicator.
The Index is headed for its biggest annual underperformance since 1998 versus the developed-nation index. Emerging-market stocks are at 10.6 times estimated earnings, the highest since May.
Joseph Dayan at BCS Financial said investors are just pausing for a breather and not much more.
Regis Chatellier at Societe Generale said the latest economic data from China to Brazil point to improved growth in developing economies and should boost demand for emerging-market assets. Chatellier said the backdrop has changed from the US leading the way on the growth front.
Saharat Chudsuwan at Tisco Asset Mgmt said as even as Chinese economic fundamentals improve, boosting the outlook for its stock market, emerging-market volatility should remain high in the next few months as the Fed tapers. Chudsuwan is still overweight shares of developed markets such as the US and Japan.
Marc Desmidt at BlackRock said emerging-market stocks are not more attractive than developed market stocks. Desmidt said it is not surprising to see bounces from oversold positions in some emerging markets but there is more stress ahead.