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Are Emerging Markets Overheated?
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And one of the biggest trends has been putting money to work in emerging markets.
On Wednesday's Fast Money Tim Seymour told you about the trend. He said that since the November lows, the emerging markets ETF [EEM
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] has charged up about 27% with investors impressed by the region's growth despite the financial crisis.
And, the World Bank confirmed Seymour's thesis saying that although the global economy will likely shrink by 1.7% in 2009, China and India should be bright spots of growth.
Well, apparently investors were listening.
In the past week, $1.193 billion moved into long-only dedicated emerging market equity funds, while the broader category of Global Emerging Market (GEM) equity funds had net inflows of $867.5 million.
Considering so much money is moving into emerging markets so quickly, are they ripe for a pull back?
According to Bank of America/Merril Lynch (BOAML) to short answer is yes. The firm said in a research note that the pickup in flows into emerging markets is giving off a sell signal.
Some profit taking appears imminent; for markets to be higher by, say Memorial Day, they will need to pause for breath first, the firm says.
Tim Seymour doesn’t buy it and says fund flows over the past 4 weeks, or next 4 weeks, don’t worry him. “Sure, it’s a crowded trade in a handful of names but talking about them like they’re a fad is missing the mark.”
In fact, Seymour thinks it’s perfectly fine to get involved in emerging markets for the long term but like every other investment you make it’s important to be selective and do your research.
If you’re looking for some ideas Seymour suggests looking at Sociedad Quimica y Minera [SQM
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] , China Mobile [CHL
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] and iShares MSCI Turkey Index Fund [TUR
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] .
All three of these names are plays on the emerging consumer class.
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Trader disclosure: On Apr 3rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (WFC), (AAPL), (GE), (GS), (MOS); Seymour Owns (AAPL), (AA), (EEM), (FCX), (FXI); Finerman Owns (BAC) Preferred; Finerman's Firm Owns (MSFT), (RIG); Finerman's Firm Owns (WFC) Preferred, (BAC) Preferred; Finerman's Firm Is Short (IJR), (MDY), (SPY), (USO), (IWM), (BAC), (BBT), (WFC); Terranova Owns (JOYG), (X), (IBM), (XOM), (HES), (POT), (DIS), (DELL), (JPM), (INTC), (BP); Terranova Owns (COP) Calls; Terranova Owns (BRCM) & (BRCM) Calls; Terranova Owns (WYNN) & (WYNN) Calls; Terranova Owns (AMGN) & (AMGN) Puts
Data is a real-time snapshot *Data is delayed at least 15 minutes