EUR 44.11 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

MSCI EM 2-Month Downtrend Reversal at Support



In our February 6, 2023 EM Strategy, we discussed that we were buyers of the MSCI EM (EEM-US) on a pullback to the 50-day MA. The pullback went a bit deeper but managed to hold at our $37.50 line-in-the-sand which we discussed in our recent ETF Pathfinder reports (Mar. 6 and Mar. 20, 2023). The EEM-US now displays a bullish 2-month downtrend reversal -- add exposure. Additionally, the MSCI EM index (local currency) is holding at an important long-term support level (see chart below, green trendline). Signs continue to point to a topping U.S. dollar (DXY), and a declining DXY has historically resulted in EM outperformance relative to EAFE. As long as the DXY remains below $105.50, we expect to see the MSCI EM form a relative strength bottom (vs. EAFE).



Below we highlight attractive and actionable themes within EM.



EM Countries. We are buying China (MSCI China/Shanghai Comp.) and, by extension, Hong Kong (Hang Seng), on this pullback. Top country overweights continue to be Greece (ATHEX Comp.), South Africa (FTSE JSE All Share), and Mexico (S&P/BMV IPC). We are also upgrading Taiwan (TAIEX) to overweight... see pages 2-3.
EM Sectors. The same EM Sectors that we discussed in our Feb. 6 EM Strategy continue to stand out as being attractive and actionable: Communications, Consumer Discretionary, and Technology -- add exposure... see page 4.