The equity indices of most major nations in the world are trending up. Emerging Markets are doing better than developed market.
Emerging Market Are Doing Better
Chart 1
The Select Sector SPDR ETF, SPY, bottomed in February 2016 (Third Panel Chart 1). EFA, iShares MSCI EAFE ETF, bottomed few days later (First Panel Chart 1) and EEM, iShares MSCI Emerging Markets ETF, bottomed few days earlier (Second Panel Chart 1). All three ETFs are on an uptrend since then with wavy moves typical to markets. However, their performance relative to each other differed during this period.
SPY mostly outperformed EFA till March 2017 (Fourth Panel Chart 1). Then EFA took the lead till mid-May. Since then they are advancing with relatively similar rates.
EEM has outperformed SPY for most of the time since January 2016 (Fifth Panel Chart 1). In the third quarter 2016, SPY took the lead but since December, EEM is the clear leader.
During most of this period, EEM also outperformed EFA (Last Panel Chart 1). For few weeks, EFA took the lead, most notable in April-May 2016 and October-December 2016.
EEM Is Asia Heavy
Fig 1
Table 1
EEM contains over 850 stocks from many emerging markets. Its top 20 holdings, however, come from few countries. China tops the list with nine companies. Followed by three from Brazil, two each from South Korea, India and Taiwan and one each from South Africa and Mexico.
71.6% of EEM companies are from Asia, 10.9% are from Latin America and 9.3% are from Europe (Fig. 1).
Chinese companies dominate the ETF followed by South Korea, Taiwan and India (Table 1).
The top ten holdings of EEM are:
- TecnCent Holdings
- Samsung Electronics
- Alibaba Group
- Taiwan Semiconductor
- Naspers Ltd.
- China Construction Bank Corp.
- China Mobile
- Baidu
- Hon Hai Precision Ind.
- Industrial and Commercial Bank of China
Emerging Asia And Latin America Are Doing Better
Chart 2
Emerging Asia has been the best performing region for most of the time since the time that EEM is outperforming SPY. The ratio of EEMA, iShares MSCI Emerging Asia ETF, to EEM was trended up from December 2017 to mid-June 2017 (First Panel Chart 2).
During this time, 0ther emerging regions underperformed EEM. AFK, VanEck Vectors Africa Index ETF, mostly underperformed EEM from December 2016 to May 2017 (Second Panel Chart 2). Since hen their performance is roughly similar.
The ratio of GAF, the SPDR S&P Emerging Middle East and Africa ETF, with EEM is persistently trending down since April 2016 (Third Panel Chart 2).
The ratio of ILF, iShares Latin America ETF, with EEM made a double top in October 2016 and March 2017 (Fourth Panel Chart 2). Then it declined till mid-June 2017. It is not rising and has broken above the down trend line, which means ILF is again outperforming EEM.
ILF has mostly lagged EEMA since February 2016 (Fifth Panel Chart 2). During this time it performed better than EEM few times – in early Q2 and Q4 2016. Since mid-June, ILF is again doing better than EEMA.
India and Taiwan Leading In Emerging Asia
Chart 3
Despite having more companies from any other nation, China has not been outperforming EEM. FXI, iShares China Large-Cap ETF underperformed EEM for most of 2015 (First Panel Chart 3). It performed as well during the first half of 2016 before doing relatively better from August to November 2016. Then it underperformed till May 2017.
EPI, WisdomTree India Earnings Fund, on the other hand, has mostly outperformed or equaled EMM since 2015 (Second Panel Chart 3).
EWT, iShares MSCI Taiwan ETF has also mostly outperformed or equaled EEM since 2015 (Fourth Panel Chart 3) except from March to May 2016.
Other major Asian countries are not doing as well as EEM – THD, iShares MSCI Thailand Capped ETF (Third Panel Chart 3); EIDO, iShares MSCI Indonesia ETF (Fifth Panel Chart 3); EWM, iShares MSCI Malaysia ETF (Sixth Panel Chart 3) and EPHE, iShares MSCI Philippines.
Mexico Is Leading Latin America
Chart 4
In Latin America a clear leader is not as apparent. Since the beginning of 2017, EWW, iShares MSCI Mexico Capped ETF, is mostly leading ILF (Fourth Panel Chart 4).
ARGT, Glbal MSCI Argentina ETF, led ILF for most of the time from July 2015 to March 2016 (First Panel Chart 4). It then generally either equaled or underperformed ILF till March 2017. ARGT out performed ILF from March 2017 to May 2017. Since then it is underperforming.
EWZ, iSHares MSCI Brazil capped ETF, either outperformed or equaled ILF from January 2016 to February 2017 (Second Panel Chart 4). It then returned less than ITL till July 2017. Since then it doing better.
The ratio of ECH, iShares MSCI Chile Capped ETF, with ILF is mostly moving sideways since April 2017 (Third Panel Chart 4). So is the ILF’s ratio with EPU, iShares MSCI Peru Capped ETF (Fifth Panel Chart 4), The ratio of GXG, Global X MSCI Columbia ETF, with ILF s generally trending down since October 2013 (Sixth Panel Chart 4).
