Can Emerging Markets Re-Emerge for the Bulls?

Emerging markets (EM) could be making a comeback after the pandemic put EM equities at risk for the majority of 2021, but that dynamic could be shifting.

The MSCI Emerging Markets Index is up a slight 0.46%, but it’s been able to turn positive after heading downward for much of 2021. Now, it appears that the index has stabilized and found some support.

Emerging markets stocks are due to report earnings, which should further rile up the bulls should there be positive results.“Investors in emerging-market stocks are finally getting rewarded, as promising signs for company earnings prompt the longest weekly rally since June,” a Bloomberg article said.

“For the first time in three years, developing-nation companies are beating profit forecasts, with average earnings coming in 3.6% above analysts’ projections, according to data compiled by Bloomberg,” the article added further. “That helped to deliver a third week of gains for the MSCI Emerging Markets Index. Traders are now awaiting results from index heavyweights including Samsung Electronics Co., China Construction Bank Corp., and Sberbank of Russia, all scheduled to report this week.”

The MSCI Emerging Markets Index is already showing signs of life over the past month. The index has risen 2.54%, overcoming a downtrend that began at the start of the year.

Comeback Time for Emerging Markets?

Bulls could be making a comeback, which opens up opportunities for the Direxion Daily MSCI Emerging Markets Bull 3X Shares (EDC) to thrive. The fund has risen about 9% over the past month.

EDC seeks daily investment results equal to 300% of the daily performance of the MSCI Emerging Markets Index. The fund invests at least 80% of its net assets in financial instruments, such as swap agreements and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.

The index is designed to represent the performance of large- and mid-capitalization securities across 26 emerging market countries. Looking at its top holdings, there’s an obvious tilt towards Asia with a focus on China, Taiwan, Korea, and India, with Brazil rounding out the top five country allocations.

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