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Vermilion Int'l Compass: Global Equity Strategy

Shifting Exposure To Emerging Markets



Emerging market equities have been one of the worst areas to invest in 2021, but we see early signs of positive change. With the US dollar failing to break above resistance at $93.50 and the MSCI EM ETF (EEM-US) displaying a false breakdown at $52, we believe now is an opportune time to add exposure to emerging market equities. To be clear, we are not getting overly bullish on EM; we have favored developed int'l (EAFE) over EM since May, and we are now shifting back to a neutral stance between the two. We see reason to believe the tide is shifting in EM's favor. Below we highlight attractive and actionable themes within EM.



EM Countries. A recovery in China (Shanghai Comp) has largely improved the picture for MSCI EM -- add selective exposure. Meanwhile, India (SENSEX), Russia (RTS), Poland (WIG), Taiwan (TAIEX), South Korea (KOSPI), and Thailand (SET) are leadership within EM -- overweight/add exposure... see pages 2-3.
EM Sectors. MSCI EM Energy, Financials, Materials, Technology, Utilities, and Industrials each have bullish price and RS trends. On the other hand, less-attractive Sectors include Consumer Discretionary, Health Care, and Communications -- be selective... see pages 4-5.