Equity markets from the U.S. have notched record after record in 2017, yet emerging markets are on pace for a record year of their own.
One well-known emerging markets-tracking exchange-traded fund, the iShares MSCI emerging markets ETF (EEM), has rallied 32 percent This particular year, on pace for its best annual performance since 2009. Its strong performance comes on the heels of a historically weak U.S. dollar relative to rival currencies, as well as some believe emerging markets could continue thriving.
“There are a lot of reasons to be very bullish on emerging markets right currently. Their economies are doing well, a lot of them are commodity-based, as well as we’ve seen copper as well as oil rally back nicely,” said Matt Maley, equity strategy at Miller Tabak.
He pointed out in which the EEM, top holdings of which are Asian technology giants like Tencent as well as Alibaba, has held firm even as the dollar index bounced in early September.
Examining a chart of the ETF, Maley said Wednesday on CNBC’s “Power Lunch” in which the EEM’s 50-day moving average has proved “rock-solid support” all year, as well as he’ll be watching in which level closely for any indication This particular’s beginning to break down.
Indeed, the EEM has not yet “rolled over” from the face of a strengthening dollar, he said. However, he noted in which an emerging markets bond ETF, the EMB, has begun showing weakness as This particular has begun diverging via the EEM. They typically move in tandem.
A stronger U.S. dollar as well as higher interest rates from the U.S. typically hurt emerging market equities, as a stronger greenback may appear more attractive to foreign investors. Furthermore, some emerging markets are tethered to dollar-denominated commodities such as oil.
The dollar can be unlikely to strengthen substantially via here, which should prove further support for emerging markets, said Gina Sanchez, CEO of Chantico Global.
“We like emerging markets because of the expansion of trade, as well as the fact in which in which has yet to make its way into the bottom line in terms of sales,” Sanchez said Wednesday on “Power Lunch,” adding in which sales in many emerging markets’ firms are continuing to grow.
Sanchez said even as cost-earnings ratios from the space have expanded, much of in which has simply been evident in emerging market technology stocks, as well as she still likes emerging markets.
The EEM fell in Thursday trading.