Emerging Markets Snapshot

Emerging Markets Performance Snapshot

7 September 2020

Emerging Trends Stock Market Global Business Growth Ticker 3d Illustration

Country ETFs 1 Year Performance Relative To IEMG ETF (Benchmark)

Country ETFs 3 Month Performance Relative To IEMG ETF (Benchmark)

The above two charts show each of the MSCI Emerging Market Index constituent country's respective ETF's one year and three month price performance relative to IEMG, the iShare Core MSCI Emerging Market ETF used as a benchmark. Most of the EM country ETFs have under performed the benchmark. This is mainly because the heavy weights, China (38.6%), Taiwan (13.4%) and South Korea (12.3%), which weigh 64.3% together, have performed very strongly during this period. However, IEMG's weight skewness does not concern us here since we are interested only in the relative price performance to identify the most bullish and bearish country ETFs.

China, Taiwan, Pakistan, South Korea, India and Egypt ETFs have outperformed the benchmark either over the last one year or 3 month period.

RRG® Snapshot

With IEMG ETF serving as a benchmark, the Relative Rotation Graph® shows India ETF progressing from 'improving' quadrant to 'leading' quadrant. Argentine, China, Taiwan and South Korea ETFs are still leading but the out performance is somewhat weakening at this stage. Pakistan ETF deserves a close attention as in the recent weeks the ETF has rapidly jumped from the 'lagging' quadrant to 'improving' quadrant. Turkey, Thailand, Philippines, UAE, Russia, Chile, KSA, Qatar and Malaysia ETFs remain in the lagging quadrant.

Below we investigate some of the interesting country ETFs performance relative to the benchmark - IEMG ETF.

Chine ETF (MCHI) / IEMG Price Ratio

While China has been outperforming IEMG for a long time, the recent breakout in the ratio unfolded during the Covid crises earlier this year. Since mid-March the ratio has been in a consolidation phase with a potential bullish continuation triangle formation in the making. While the ratio stays above the yearly and quarterly averages, scope remains intact for a renewed strength to new highs.

Taiwan ETF (EWT) / IEMG Price Ratio

Taiwan has been consistently outperforming IEMG. The ratio has recently breached the 15 month bull channel support and the quarterly moving average. This suggests weakening trend. But at this stage there is evidence of a trend reversal. Only a decisive break below the yearly average would concern.

Pakistan ETF (PAK) / IEMG Price Ratio

Pakistan ETF price has been under performing the MSCI Core IEMG ETF for a while. However, on the long term charts the ratio seems to have bottomed out since last year. So far we do not see a bullish confirmation. This ETF deserves a close attention, as a break above December/January peak area would confirm a one year double bottom formation and open scope for a significant advance in the ratio.

South Korea ETF (EWY) / IEMG Price Ratio

Although a bit volatile, the ratio has beem steadily strengthening. The trend is not very well defines, however, given that the ratio is above the yearly average and making new highs, look for somewhat further strength ahead. Only a clear breach of the July's higher low would concern.

India ETF (INDA) / IEMG Price Ratio

There are some strong signs of improvement on India ETF's price performance relative to the IEMG ETF. The ratio has recently broken above a key resistance level and it is challenging the 15 month trendline resistance. A break over which would confirm a significant recovery towards the 2019 peak.

Egypt ETF (EGPT) / IEMG Price Ratio

While Egypt ETF's price relative performance against the IEMG ETF might have been bottoming out in the recent months, at this stage there is no sign of any notable recovery in the ratio. The outlook does not seem very bright at this stage.

Absolute Price Performance - Most Bullish Emerging Market Country ETF's

iShare MSCI China ETF (MCHI)

China ETF has seen an over 55% price increase since it registered a low near 50 in March this year. Since breaking above a trendline in early July the ETF has been consolidating and has recently posted a new record high. While the ETF holds above recent consolidation low at 69.78, seen 24 July, look for fresh record highs in the near future. Only a sustained breach below 69.78 would warn of a deeper correction towards 64.00 - close to the yearly moving average and a 50% retracement of the rise from 50.00

iShare MSCI Taiwan ETF (EWT)

In early July the rally broke above the 9 year trendline resistance, connecting 3 major long term highs since 2011, to mark a fresh record high. With the overbought conditions now unwinding, scope remains for the rally to resume to new record high. Any corrective dips should find solid support around the yearly average near 40.00.

iShare MSCI India ETF (INDA)

Following a near 70% rise from the March trough, the iShare MSCI India ETF is somewhat overbought. Also the market is now pretty close to some strong resistance area and a near term corrective dips seems possible. However, any dips should be limited to the 31.00/30.00 area before a rally unfolds through the 36.00-38.00 resistance region.

Global X MSCI Pakistan ETF (PAK)

Pakistan ETF has seen a significant decline since March 2017. However, now it looks like that the ETF may be poised for a recovery rally. The ETF is above it's yearly and quarterly averages and on the cusp of breaking above the 2+ year bear trendline. That would confirm scope a further recovery. Also it is noteworthy that there is a MACD and RSI bull divergence evident on the weekly charts, suggesting further recovery in the near future. Only a break below 25.00, near the quarterly average and trendline support, would concern.

Business enquiries welcomed, Please find my CV here

Charting Software Courtesy of ProRealTime

RRG® is a registered trademark of RRG Research

Page updated

Report abuse