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Next Up: Emerging Markets Re-Route
Now that commodities have firmly sold off and stocks in general are on the brinck of a possible fierce correction, investors are looking for new havens to park their liquidities.
We have been closely monitoring the investment arena over the last weeks to see where new money is being put.
Overnight, we received some very interesting news on what Asian hedge
funds are up to. Zen Investment Management, a Shanghai-based hedge fund
that was huge in commodities as of late, and therefore outperforming 99%
of its competitors, seems to be shifting gears… towards Emerging
Markets!
Via Bloomberg:
The Zen Macro Strategic Fund may purchase equities in
Asia including Hong Kong and India because falling commodity prices will
reduce inflationary pressure, Jacky Cheung, chairman of Zen Investment,
said in an interview at its offices in Shanghai on May 16. China’s
financial and power companies are attractive because of valuations, he
said, without naming any.
“With the decline in investors’ risk appetite, the commodities market
may not have hit bottom yet,” said Cheung, 41. “Equities will be very
good investments in the second half and next year.”
With the recent commodity sell off and the tightening measures in
various Asian countries, Zen thinks inflation could start to ease in
this growth area, which could kick start Emerging Markets stocks again.
As can be seen on the chart below, Asian stocks have been
underperforming in 2011, mostly trading in negative territory.
Commodities (CRB) were the darlings of traders… until recently!
If we take a closer look at the Asian Emerging Tigers, the biggest players — China & India — have underperformed substantially over the last year!
As a result, Emerging Market valuations took a big blow:
China’s stock measure trades at 13.2 times estimated
earnings for this year, compared with a multiple of 19.9 over the past
four years, according to weekly data compiled by Bloomberg. That
compares with 14.4 times for India’s Bombay Stock Exchange Sensitive
Index, 11.1 for the MSCI Emerging Markets Index and 13.4 for the
Standard & Poor’s 500 Index.
“Given’s Europe’s debt crisis and declines in commodities, China is
more likely to relax tightening policies than intensify them in the
second half of the year,” said Cheung. “The current valuation of stocks
is really low. There’s a big probability that stocks will have a decent
rally.”
Be sure to have some money positioned in Emerging Markets if
the new big liquidity wave hits the Chinese and Indian stock exchanges.
>>> The Emerging Markets Report
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This article is worth a grain of salt. From the chart
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s218730483]&disp=P
note the close relationship of emerging markets and US markets as the Fed plays with market luqidity. Also note that the emerging markets are up agains a major long term trend. If this trend breaks and the PSAR goes to sell I would be short. Also, India is an unattractive alternative given the data (ie PSAR sell)
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show[s221878006]&disp=P
With China's real estate bubble about to pop, and with their opem message "to tighten" I would be wary of investing too much in that sector. When China slows even commodities will feel the pinch and Australia will most likely plunge also since they are very dependent on China's addiction to resources.
GL!
It's a peculiar thesis, which if read right suggests that Asian currencies are about to witness their QE measures. That part makes sense, the falling commodity prices part doesn't.
Note to self: Stay away from smart money europe.
Ha! Emerging markets shifting their invests to emerging markets... ...on Mars?
Buying China and India as the GFC is about to kick off again? The US Depression is going to go global. Seems a retarded strategy but who knows how long this fiat game can continue...
EWZ...add you favorite emerging market symbol.
EDC when EWZ gets oversold.
Well there is a price to pay to join the big man's club. When you jump in on the deep end you better know how to swim when they turn on the wave simulator in the pool!