Preparing for the Coming Emerging Markets Rally

A rising number of strategists and asset managers predict that emerging markets will outperform in the next few years. But how much money should an investor allocate to this volatile group, and how best to participate?  A good starting point is emerging markets’ portion of the world’s equity capitalization—about 13%. But because investors tend to have a home-country bias that prevents them from venturing too far abroad and some markets have lost value owing to falling currencies, the 13% figure may be on the low side, particularly when you consider some of the new or expanding members of the market.

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East Europe Benefits From Greek Deal Hopes

Signs of a last-minute deal to prevent a Greek default propelled emerging stocks to their biggest one-day rise in more than two months and the relief also lifted emerging currencies, especially in eastern Europe.  MSCI's emerging equity index rose 1 percent, pulling off 2-1/2 month lows hit last week when Athens appeared headed towards default and a euro exit just as the U.S. Federal Reserve is preparing for its first rate rise in almost a decade.  The Athens market jumped more than 8 percent as euro zone officials said Greece's reform proposals were "reasonable".

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For Emerging-Market Traders, Trend Is Their Friend

It used to be that a four- or five-day rally in emerging-market stocks was a big deal.  Not anymore.  Nowadays, if the stretch of gains, or losses, doesn’t reach double digits, it almost feels inconsequential. Consider these runs: The MSCI Emerging Markets Index fell for 12 straight days from late May through early June, the longest streak since 1990; less than two months earlier, the gauge rose for 11 consecutive sessions, the longest rally since 2005. In the past six months alone, there have also been moves of eight and nine straight days.

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Europe Has Different Attitude About Coal From Emerging Markets Like China

Companies, banks, and investment funds, primarily European, have been coming out in recent weeks with announcements they will halt investments in coal, a new front in efforts to reduce use of the highly polluting fuel that faces a battle against the hunger for power in emerging markets.  The latest move came Friday, when Norway's parliament voted to force its sovereign wealth fund — the world's biggest — to pull out of firms that are heavily involved with coal.  Earlier in the week, French energy-group Total announced it would withdraw from its coal activities, notably in South Africa where it is involved in the production and sale of the fuel that is important for electricity in numerous countries around the world.

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A Concentrated Bet on Emerging Markets

Fund managers who invest in emerging markets have thousands of stocks to choose from, in more than 20 countries across Europe, Asia, Africa and Central and South America. But some of the largest emerging-market funds hold 100 stocks or fewer.  Among them: the $14.5 billion Lazard Emerging Markets Equity fund, which recently held 78 stocks; the $11 billion Virtus Emerging Markets Opportunities fund, with 74 stocks; and the $10 billion Aberdeen Emerging Markets fund, with 64.

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