EMERGING MARKET EQUITIES Archives | Page 3 of 6

ACWI and EEM

November 16, 2016/0 Comments/in DEVELOPED MARKET EQUITIES, EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Since the election in the first week of November, U.S. equities had a strong performance. Though, strong rally in U.S. equities has been limited to very few sectors. ACWI ETF (underlying instrument: MSCI All Countries World index that tracks the performance of the 23 developed and 23 emerging markets) has been in a correction since the beginning of September. EEM ETF (underlying instrument: MSCI Emerging Markets index) broke down two major support levels, a year-long upward trend line and a horizontal support at 35.88 levels.

There is a possibility of the latest downward trend channel to form a flag continuation and breakout higher without breaching the year-long uptrend on the ACWI ETF. However, failure to do so can result in a similar price action that we have seen on the EEM; a breakdown of the year-long trend line support. Both charts suggest that equity market strength is limited to U.S. equities and in the U.S. markets it is limited to very few sectors.

ACWI ETF weekly scale price chart

ACWI ETF daily scale price chart

EEM ETF weekly scale price chart

S&P 500 INDEX and MSCI ACWI

September 25, 2016/3 Comments/in DEVELOPED MARKET EQUITIES, EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Over the past two weeks, global equity markets rebounded from strong support levels. Last two week’s recovery came after the S&P 500’s pull back to its long-term support level at 2,125 levels. Long-term charts of S&P 500 index and a broader representation of global equity market performance, the MSCI ALL COUNTRIES WORLD INDEX, possibly completed a re-test of the broken resistance/support levels. Once a resistance is cleared it becomes support and vice versa.

S&P 500 index, a benchmark for large cap US equities broke out of a year-long sideways consolidation in mid-July. After reaching 2,193 levels in mid-August, the index pulled back to test the broken resistance at 2,125 levels. Both the year-long upward trend line and the horizontal support held well and the index rebounded without any technical damage to the long-term trend. Unless the markets reverse once again to challenge the support at 2,125 levels, we will claim the latest price action was a pullback and is likely to be followed by a resumption of the long-term uptrend.

Monthly scale price chart of S&P 500 index

Weekly scale price chart of S&P 500 index

MSCI ALL COUNTRIES WORLD INDEX captures large and mid cap representation across 23 Developed Markets and 23 Emerging Markets countries. With 2,481 constituents, the index covers approximately 85% of the global investable equity opportunity set. Please note that iShares has an MSCI ACWI ETF that seeks to track the MSCI ALL COUNTRIES WORLD INDEX.

In mid-July MSCI ACWI, similar to S&P 500 index, completed a significant chart pattern. A year-long H&S continuation chart pattern was completed with a breakout above 410 levels. Since then the index possibly completed a pull back to the neckline of the H&S chart pattern. Last week’s sharp reversal increased the likelihood of a continuation towards 443 levels. Unless the index reverses to challenge the support at 405 levels, we will identify the latest price action as a pullback that is likely to be followed by a resumption of the long-term uptrend.

Monthly scale price chart of MSCI ACWI

Weekly scale price chart of MSCI ACWI

If global equity indices mentioned above resume their uptrends, we are likely to see fresh new highs on several individual securities. Financial media usually pays attention to 52 week highs as a measure of security’s strength. There is even a better way to look at this; all-time highs. It is usually difficult for investors to buy stocks that are reaching their all-time highs. But usually the most promising part of an uptrend starts when a stock moves into uncharted territory in other words all-time highs. Below are some of the stocks on my watch-list that are likely to breakout to all-time highs and some that are likely to record 52 week highs. These stocks formed clear bullish chart patterns with identifiable horizontal boundaries. Breakouts will not only complete the chart patterns but also will push the stocks to all time highs and 52 week highs.

U.S. & CANADA

EUROPE

JAPAN & HONG KONG

CHINA SSE 5O INDEX

August 13, 2016/0 Comments/in EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Chinese equities might be on the verge of a strong breakout. This week’s price action pushed the SSE 50 Index to the horizontal resistance at 2,225 levels. Since the beginning of 2016, SSE 50 has been recording higher lows, a bullish signal. Another week of strong price action can clear the 8 month-long resistance and push the index towards 2,500 levels. Volatility is low both on the daily and weekly charts suggesting a trend period might develop after a decisive breakout.

There are several bullish chart set-ups in Hong Kong listed securities. I share below some of the clear chart patterns that are likely to resolve on the upside if we see a breakout on the Chinese benchmark equity index.

MGM CHINA formed a year-long H&S bottom, a bullish reversal chart pattern, with the neckline standing at 12.20 levels. Breakout above 12.20 can push the stock higher to test 17-18 area.

TONGDA GROUP formed a year-long ascending triangle, a bullish continuation chart pattern, with the strong horizontal resistance standing at 1.69. Breakout above 1.69 can push prices towards 2.0 levels.

PING AN is now testing the horizontal resistance at 38.80. Stock closed slightly above the resistance. However, this week’s price action will confirm the breakout. Another strong weekly close will complete the multi-month base formation.

Note: According to Edwards and Magee, a daily close above the resistance by a 3% margin is required to confirm a breakout. I follow this approach to confirm a breakout.

TURKEY BIST 100

July 21, 2016/0 Comments/in EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Turkish equities are at critical support levels from where they can see a possible turnaround. We are talking about a country and financial markets that experienced a failed coup, an S&P downgrade and a recently declared state of emergency. Yet the magnitude of the correction is less than what BIST 100 experienced after the Gezi Park protests in 2013 and much smaller in magnitude when compared with the banking crises in 2000-2003 and the global financial melt-down in 2007-2008. Is it possible to say the worst is over?

Long-term chart of the BIST 100 index shows the multi-year long uptrend being tested between 70K-72K area. This is also the lower boundary of a larger scale sideways correction which I label it as a symmetrical triangle.

Daily chart shows the 3 year-long sideways consolidation. After the recent sell-off the BIST 100 index is now very close to strong support area between 70K and 72K. Unless we see a breakdown below the strong support area, we will expect a rebound and a possible reversal.

MSCI Turkey has underperformed MSCI Emerging Markets index. Though, the ratio between MSCI TURKEY and MSCI EM is now at a major support level. This ratio is indexed to 1 with the base year being 2016. Since the beginning of the year, including the latest sell-off the ratio stands at 0.92. This is 8% underperformance versus the MSCI EM. More important than the numbers, I think the level of the ratio suggests a possible reversal. Unless there is a breakdown below 0.90-0.94 area, being long Turkey versus MSCI EM at this inflection point could be a low risk trade.

Corrections led by a financial/economic cause has been deeper and more lengthy when compared with corrections led by political turmoil. Recent data from 1996 till today supports this conclusion. 2000-2003 was the banking crisis in Turkey. 2007-2008 was the global financial melt-down. Both has been the major corrective periods on BIST 100 index. 2011-2012 was related to the global recession fears and the global equity corrections. Since 2013, BIST 100 is in a sideways consolidation.

During each corrective period, Industrials outperformed the BIST 100 index. In other words Financials have under-performed. Risk on trade for Turkish equities have always been buying the financials. Industrials have been a defensive play. The ratio between Industrial Index and BIST 100 reached 2003 levels. If there is a turnaround (a market reversal), you should keep an eye on the performance of financials in the coming weeks. This ratio should also reverse from 2003 levels.

Several charts above suggests equity markets in Turkey are at a major turning point. If we see stability at these levels I’ll weigh going long Turkey.

MEXICO IPC INDEX

July 17, 2016/0 Comments/in EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

A strong breakout is likely to take place on Mexico’s IPC Index. Last week’s price action breached multi-year horizontal resistance at 46,500 levels. The horizontal resistance was tested for 5 times over the past four years. Another week of strong price action will confirm the breakout on the local price index and will suggest higher levels in the coming months. It is important to note that both on weekly and monthly scale the index is going through low volatility period. Usually breakouts from such technical condition result in prolonged up/down trends depending on the direction of the breakout.

MEXICO IPC INDEX

May 22, 2016/0 Comments/in EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Mexico IPC index is possibly preparing for a strong breakout to all-time high levels. Over the past three years, the IPC index tested the strong horizontal resistance for the 5th time. Since the beginning of April, price held close to the upper boundary. Last two months sideways consolidation can be a symmetrical triangle and a preparation for a breakout above 46,500 levels. 46,000-46,500 will act as strong resistance in the following weeks. A decisive weekly close above the resistance area can launch a multi-month uptrend for Mexico’s IPC index. Breakdown below 44,500 can result in a lengthy consolidation.

MEXICO IPC INDEX WEEKLY SCALE PRICE CHART

MEXICO IPC INDEX DAILY SCALE PRICE CHART

MEXICO IPC INDEX

March 21, 2016/0 Comments/in EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Mexico’s IPC index, denominated in local currency, is preparing for a strong breakout. During Emerging markets poor performance (2011-2016), Mexico outperformed the MSCI Emerging Markets index. Strong relative performance is also reflected on the absolute performance of the IPC index, with the national benchmark now challenging horizontal resistance for the 5th time over the past 3 years. Breakout above strong resistance can push the index to all-time high levels.

Weekly price chart of the MEXICO IPC INDEX

The developing chart pattern could be an ascending triangle with bullish implications. Breakout above 46,500 levels will confirm the bullish chart formation and suggest higher prices that can target 55,000 levels.

Relative performance ratio between MSCI MEXICO and MSCI EM in local currencies

Relative performance ratio between MSCI MEXICO and MSCI EM in U.S. dollar

While the MEXICO IPC INDEX is forming a bullish ascending triangle poised for a breakout to higher levels, here are some of the constituents that have similar bullish chart set ups.

Weekly price chart

GFNORTE formed a 3 year-long sideways consolidation. Stock is now challenging historical high levels. Breakout above 100 levels will be very positive.

Weekly price chart

2 year-long H&S bottom on ALPEK has strong resistance at 27.15 levels. A decisive weekly break above the neckline at 27.15 will result in higher prices.

MSCI EMERGING MARKETS

December 13, 2015/0 Comments/in EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Emerging markets are experiencing renewed weakness after three months of sideways consolidation. MSCI Emerging Markets index sold-off between May and August 2015. Since August the index rebounded but hardly reached the strong resistance area formed by several long-term trend lines. In August, 850-900 area was broken down with a long monthly price action. Three months of consolidation was not able to push prices back to July-August levels. As the FED December meeting approached, emerging markets started weakening again. Breakdown below August 2015 low levels (771) can result in further sell-off.

It is important to note that, since 2011 emerging markets are under performing developed markets. This trend is likely to continue.

Not all emerging markets are showing weakness. Selective markets are performing better than their peers. I’m reviewing below markets that are exposed to strong downward momentum if the MSCI Emerging Markets index breaks below August 2015 low levels.

Turkey BIST 100 index formed head and shoulder chart pattern. Index is in the process of breaking down the year-long top formation. Another week of price action might be needed for confirmation as the index closed at its August low.

Not sure if the top formation on South Africa All Share can be plotted as H&S top, but breakdown below 46,000-46,500 area will result in further weakness in the coming months.

Philippines SE Composite Index is rolling over with a possible H&S top formation. I see this market a strong candidate for further weakness.

Another Asian emerging markets index that has outperformed its peers, is now showing signs of weakness. While the long-term trend might remain intact, BSE Sensex index can retest 21,200 levels.

Brazil’s Bovespa Index has been in a clear downtrend and it continues to make lower lows. In case of a breakdown on the MSCI emerging markets index, Bovespa can test the lower boundary of its trend channel at 40,000 levels.

Mexico IPC index performed better than its peers. Though, the South American index is also challenging multi-year trend support.

In emerging Europe, Poland’s WIG 20 index is selling off sharply. Index can test 2009 low levels.

Recently upgraded energy economies are facing tough times. With the collapse of oil and gas prices, Qatar’s DMS 20 index started selling off. First support area remains between 8,000 and 8,500.

Egypt’s EGX 30 index is now challenging multi-year trend support. Breakdown could result in further weakness towards 5,000-5,500 area.

EMERGING MARKETS and SOUTH AFRICA

November 15, 2015/0 Comments/in EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Following one month of positive price action, weakness resumed in the emerging market equities. Until previously broken support levels are breached on the upside, strength in emerging market equities will be classified as counter-trend move. In other words, MSCI Emerging Markets index should clear 860-900 area on the upside to reverse the larger-scale downtrend.

Since the beginning of 2011, emerging market equity weakness has been mainly due to sharp depreciation in the local currencies. Some of the emerging market equity indices reached all-time high levels while the U.S. dollar denominated MSCI Emerging Markets index recorded lower lows. One good example is the South Africa All Share Index (with local currency). Since the beginning of 2011, South Africa All Share index resumed its multi-year uptrend, reaching all-time high levels while the MSCI South Africa index (price index in U.S. dollar) trended lower.

Weakness in emerging market currencies are likely to continue. USD/ZAR is breaking out to all-time high levels. Supported by the FED rate hike we might see acceleration in those currency trends.

Any thoughts on how U.S. dollar denominated equity indices such as MSCI South Africa will perform if we see South Africa All Share index testing lower levels with U.S. dollar strength?

MSCI WORLD MARKETS vs. MSCI EMERGING MARKETS

October 25, 2015/0 Comments/in DEVELOPED MARKET EQUITIES, EMERGING MARKET EQUITIES, Uncategorized/by Aksel Kibar

Central banks across the globe are showing their support for the financial markets by either delaying interest rate hikes or cutting interest rates and showing willingness to increase quantitative easing measures. After the ECB’s dovish comments, Chinese central bank cut interest rates to boost economic growth.

Since 2011, markets are positioned for emerging market weakness and this trend continues to remain intact irrespective of interest rate cuts or additional monetary stimulus by central banks. Emerging markets continue to underperform developed markets as the ratio between MSCI World Markets/MSCI Emerging Markets shows. This trend is likely to continue in the following months.

ACWI and EEM

S&P 500 INDEX and MSCI ACWI

CHINA SSE 5O INDEX

TURKEY BIST 100

MEXICO IPC INDEX

MEXICO IPC INDEX

MEXICO IPC INDEX

MSCI WORLD MARKETS vs. MSCI EMERGING MARKETS

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