Emerging Markets Soon to Breakout?

09/11/2014 7:00 am EST

Focus: GLOBAL

Tiho Brkan of TheDailyGold.com takes a technical look at how emerging market equities have been performing and whether now is the time for global fund managers and asset allocators to shift capital from expensive Developed Market equities towards laggards.

Chart 1: Could emerging market equities break out in coming quarters?

chart
Source: Short Side of Long
Click to Enlarge

Emerging Market equities have under performed Developed Market equities for years now. Slowing economic activity, falling export growth, over-leverage, inflationary pressures, and geopolitical tensions have plagued various regions and countries within the index. Since early 2010, the MSCI Emerging Market index has basically gone sideways while US equities have risen to record highs and become extremely expensive on historical basis.

Chart 2: Emerging Asia equities have already broken out to the upside.

chart
Source: Short Side of Long
Click to Enlarge

The question now is, could global fund managers and asset allocators shift capital from expensive DM equities towards laggards? GEM equities have now approached a major resistance zone, after making no progress since at least 2007. It seems that a breakout could be at hand in coming quarters, especially since Asia is already leading the way higher.

By Tiho Brkan of TheDailyGold.com

Related Articles on GLOBAL