Emerging market ETF

[Anonymous]

Hi Cam,

What is your view on emerging market now? I am thinking of adding ETF, such as, EDC, EEM and etc.

The P/B of emerging stock is below 08′ level and is now equivalent to 01′ and 03′ level. Buy EDC/EEM and hold for 6 months, and there can be a 20+% returns?

Thanks!

[Cam Hui]

EM equities have been highly correlated with commodity prices, which are inversely correlated to the USD. In effect, a bet position on EM is a bet on USD weakness.

While I am constructive on commodity prices and therefore EM equities, you also need to be aware of the macro bets that you are taking if you buy EEM, etc.

[Anonymous]

Do you think EM equities is hit the bottom as of now? Or there are too many moving parts – commodity prices (esp oil), macro, yuan depreciation?

[Cam Hui]

See the chart in Gundlach presentation on EM and commodity prices:
http://www.businessinsider.com/jeff-gundlach-presentation-januray-2016-2016-1

[Anonymous]

In that case, EM equities has another 40% to drop?

Also, since your forecast is that US equities will peak in Q2/Q3 2016, the divergence between EM and US equities will continue?

[Author]

Posts