Emerging markets stocks started the week strong following the Thanksgiving holiday in the U.S. after China’s manufacturing activity came out better than expected.
According to a Reuters report, “China’s factory activity expanded at the quickest pace in almost three years in November, a private business survey showed on Monday, sparking a rally in global stocks. An index of emerging market shares rose about 0.1%, led by gains in China and Hong Kong. Chinese stocks ended higher, but pared early gains as concerns about a wider slowdown lingered.”
However, all investor eyes are still fixated on a U.S.-China trade deal, which should give EM assets a boost should a deal be finalized, particularly the “phase one” implementation. The “phase one” deal was announced in October, but both nations are still trying to iron out the finer details for an agreement.
Meanwhile, U.S. equities were slow to start the week with a drop in the Dow Jones Industrial Average by over 260 points. In terms of currencies, the dollar did hold steady against its EM counterparts.
“Assets in the developing world marked a fairly muted start to December, having ended the previous month marginally lower amid mixed Sino-U.S. trade signals and weakening economic indicators,” the report added. “Demand for riskier assets has waned as an initial trade deal between Washington and Beijing remains elusive two weeks before the next round of U.S. tariffs kick in on Chinese imports. A basket of emerging market currencies was trading slightly lower against a firmer dollar on Monday.”
For investors looking for the continued upside in emerging market assets, whether driven by a weakening USD or continued developments around trade, the Direxion MSCI Emerging Over Developed Markets ETF (NYSEArca: RWED) offers them the ability to benefit not only from emerging markets potentially performing well, but from emerging markets outperforming developed markets.
RWED seeks investment results that track the MSCI Emerging Markets IMI – EAFE IMI 150/50 Return Spread Index. The Index measures the performance of a portfolio that has 150 percent long exposure to the MSCI Emerging Markets IMI Index and 50 percent short exposure to the MSCI EAFE IMI Index.
On a monthly basis, the Index will rebalance such that the weight of the Long Component is equal to 150% and the weight of the Short Component is equal to 50% of the Index value. In tracking the Index, the Fund seeks to provide a vehicle for investors looking to efficiently express an emerging over developed investment view by overweighting exposure to the Long Component and shorting exposure to the Short Component.
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