Mr Market: EM gets the cold shoulder

Let's take a quick look at which markets are most out of favour by Mr Market. Below is a table of the top 10 losing funds from the past 3-months (Source: Avanza)

We see big losses in the emerging market countries of Indonesia, India and Turkey. A deeper look reveals painful 40% falls since the highs of May. We must remember of course these markets may have moved from being overvalued to being reasonably valued.

As investors though what we really want to know is, are they are buy yet? Have they moved too far to the down side giving upside opportunity?

Without digging into valuations such as CAPE but looking purely % drawdowns at least 60'% may be a good time to buy in order to get good 3-year returns (Mebane Faber analysis).

That would imply another 30% drop from where we are now! Think about what that would really require in fortitude to buy an EM fund cut in half and act against 'end of the world' discussions in the news feeds.