BCA Research is urging caution, stating "The underperformance of Emerging Markets (EM) equities has been broad-based and is a source of concern."
During the past seven months the only standout in terms of market gains within the BRIC group has been Russia. This, however, BCA points out, has been as a result of the awakening of energy stocks on account of the surge in oil prices since Q3 last year.
Despite record inflows, notes BCA, the markets of the most prominent emerging countries have not rallied along with other 'risk trade' assets, is possibly a sign of trouble ahead.
Underperformance and poor absolute returns have been broad-based across EM markets, says BCA.
Emerging markets have underperformed all developed markets, except Japan, Spain and Italy. In addition BCA notes that at least half of emerging markets' large cap stocks, small caps, and industry groups are fetching prices below their 200-day moving averages.
Finally, BCA notes that the advance/decline line for the entire emerging markets segment is now lower than during past bull market declines, and relative advance/decline is sitting at a 10-year bottom.
BCA's conclusion: Maintaining negative watch on EM performance, in both relative and absolute terms.
Source: BCA Research
