17 Nov 2015

A Big Bet on Emerging Markets

For most of last week, I was in Boston at Schwab’s IMPACT conference – my fourteenth pilgrimage that includes prominent speakers, workshops and a football field size area of vendors pitching everything under the financial services sun. This year featured more academics than usual, which I found particularly engaging.  One of the sessions was actually a debate between academic Roger Ibbotson (who also manages some money) and Rob Arnott, a… Read More

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21 Aug 2015

Emerging Market Currencies Roil Stocks

In addition to the growing concerns about global economic growth, the Chinese stock market sell off and yuan devaluation and falling oil prices, markets are increasingly spooked by other emerging market currencies and stock prices. An average of 15 emerging market currencies is down about 10 percent so far this year while countries with large commodity exposure are suffering even more.  For example, so far this year, the Russian ruble… Read More

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8 Jul 2015

When Bubbles Burst: China Edition

While Greece is getting all of the headlines, the bubble in mainland Chinese stocks that I wrote about in April and June is now bursting (click here or here for refreshers).  The Shenzhen index is down -38.5 percent from its peak on June 12th through yesterday and the Shanghai index is down -27.9 percent over the same time period. The following shows these two indexes in yellow and orange compared to the S&P 500 in blue… Read More

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11 Jun 2015

How to Tell Emerging from Developed Markets

Last week, I wrote that the emerging market stock indexes that Vanguard tracks will be adding mainland China A-shares to their index (click here and for a refresher).  On Tuesday, MSCI, the world’s most popular index creator for non-US stock indexes announced they would not be adding Chinese A-shares to their emerging markets indexes. MSCI believes there are too many regulatory issues related to non-Chinese owners that could make owning… Read More

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3 Jun 2015

Emerging Powerhouse

When the Communist People’s Republic of China (PRC) took control of China in 1949, all privately owned assets were expropriated by the government and what were once vibrant capital markets went dark until December, 1990 when eight companies started to trade publicly on the Shanghai Stock Exchange. Now, as I wrote in April, the mainland Chinese stock markets are red hot and many people believe they are in the middle of… Read More

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23 Apr 2015

China’s Red Hot Market

Last Friday, Chinese regulators said that they were going to make borrowing on margin more difficult for investors in an effort to curb the recent euphoria in Chinese stocks. I have to admit that I didn’t grasp just how hot Chinese markets have been recently, partly because the Chinese stock markets are broken up into multiple segments that are hard to follow and have dramatically different returns.   The Hang… Read More

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16 Apr 2015

Wither Emerging Markets?

In the first few years after the 2008 financial crisis, a lot of investors were excited about emerging markets. The story making the rounds at the time was that the US and other developed markets were in for a long period of sluggish growth while the prospects for economic growth in emerging markets were still strong. Therefore, the story went, investors should allocate money away from the US stocks into… Read More

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2 Feb 2015

The Vastness of the Emerging Markets

There are only a handful of index providers globally and their intense competition breeds some very interesting innovation. Recently, one of the large providers, MSCI, launched a series of indexes that attempt to reflect the performance of companies based on their economic exposure rather than the location of their headquarters. When indexes were first created, most companies economic reach didn’t expand much beyond their own borders. Today, however, businesses are… Read More

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17 Nov 2014

S. Korea Has Outsized Impact on Emerging Indexes

In 2012, Vanguard announced that they were changing the benchmarks that they track for a large number of their funds. Their domestic stock funds, which had followed indexes created by MSCI, would soon track indexes created by CRSP. Since we don’t use any Vanguard mutual funds or exchange traded funds (ETFs) that track US markets for private clients, that change didn’t impact us. However, we do use Vanguard ETFs for… Read More

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27 Jan 2014

Emerging Markets Tail Wags Dog

Concerns about a slowdown in China’s economy appears to be the ‘go-to’ rationale for the selloff, although there hasn’t been any new data since the Purchasing Index Managers (PMI) report that we discussed on Friday. A secondary, but possibly more plausible explanation is that investors are looking at the weakness in Emerging Markets currencies and are concerned about the end of the Federal Reserve’s quantitative easing program. We noted the… Read More

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