Emerging markets wobble in sync, but there’s a silver lining
Synopsis: Unless you have been living under a rock for the past few months, you would know that 2022 has not been great for global markets. The stubborn inflation worries had led to a serious pause and reversal on loose monetary policies which was followed by the Russia-Ukraine war, thus complicating the situation further. There is also a sector rotation at play and ‘Tech meltdown’ combined with ‘preference for commodities’ is also impacting the market. Amidst the volatility and gloom, it would have been unrealistic to expect that the emerging markets would have behaved any differently. All of this has gotten more serious with Fed’s unequivocal stand on rate hikes and policymakers’ preference shifting from growth to taming inflation. This is indeed the case and a subdued sentiment is reflected in investor response. Over the last few weeks, we have seen a serious decline in EMAlpha’s stock market sentiment for many countries including Brazil, China, India, Hong Kong, Malaysia, Taiwan, and Phillippines. However, the silver lining is that some other markets such as Indonesia, South Korea, Poland, and Thailand are showing remarkable resilience in their stock market sentiment.
Global markets are struggling and so are the EMs
The stock market sentiment of major EMs such as China, India, and Brazil remains negative and the market performance also conveys the same.
Bovespa Index has delivered -10.1% return in the last one month and -0.4% in the last six months.
Chart 1: Brazil Stock Market Sentiment
Hang Seng Index has delivered -5.7% return in the last one month and -20.0% in the last six months.
Chart 2: Hong Kong Stock Market Sentiment
NIFTY has delivered -7.8% return in the last one month and -9.5% in the last six months.
Chart 3: India Stock Market Sentiment
The KLSE Index has delivered -4.7% return in the last one month and -0.6% in the last six months.
Chart 4: Malaysia Stock Market Sentiment
PSEi index has delivered -3.0% return in the last one month and -9.2% in the last six months.
Chart 5: Philippines Stock Market Sentiment
Taiwan Capitalized Weighted Stock Index has delivered -5.9% return in the last one month and -8.6% in the last six months.
Chart 6: Taiwan Stock Market Sentiment
SSE Composite Index has delivered -5.2% return in the last one month and -14.0% in the last six months.
Chart 6: China Stock Market Sentiment
The silver lining
IDX Composite has delivered -4.1% return in the last one month and 3.4% in the last six months
Chart 8: Indonesia Stock Market Sentiment
KOSPI has delivered -3.1% return in the last one month and -10.9% in the last six months.
Chart 9: South Korea Stock Market Sentiment
WIG20 Index has delivered -18.3% return in the last one month and -27.6% in the last six months.
Chart 10: Poland Stock Market Sentiment
SET Index has delivered -4.6% return in the last one month and -1.7% in the last six months.
Chart 11: Thailand Stock Market Sentiment
Research Team, EMAlpha LLC
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EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) more accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. EMAlpha works on information discovery and ESG solutions for Investors in Emerging Markets, using AI and NLP tech. Our mission is: “To help increase capital flow, in terms of FDI and FPI, to Emerging Markets by lowering information barriers using AI/NLP”. EMAlpha Products help achieve both alpha and ESG solutions and the idea is to help asset allocators, asset managers, banks and hedge funds along with companies with cost and time efficient access to relevant information. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious. Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.
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