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Emerging Money 2013 EM vs. DM trade update

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At Emerging Money we have spent a lot of time at arguing for emerging markets' (EM) outperformance relative to domestic markets (DM). This has been the right call and we feel there is merit to staying in the trade. Friday night's Trading the Globe on CNBC ( tradingtheglobe.cnbc.com ) pointed out the fund flows and how we believe this is a trade for 2013.

However, trading calls should take a tone of caution because it's been a big move for the iShares MSCI Emerging Markets Index (EEM, quote) and fund flows are strong enough to trigger technical sell signals according to a Global Fund Manager Survey .

Citi is out today with another interesting perspective on this, highlighting technical caution but not game over. Also note the valuation differential for EM vs. DM of 12x v 13.6x. The note from Citi's strategy team is worth quick read. We don't think EM is overbought despite recent outperformance and inflows.

Certainly, the inflows into EM equities have been impressive. Year-to-date, flows are now $45 billon (7.8% of AUM), the third best year ever. And markets did not crash in June, which was the all in low for the year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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