In Emerging Market Fed Selloff, Buy Argentina, Russia & Sell China, Turkey?

Source: BARRON'S
By: Dimitra DeFotis

The emerging market selloff this month is just part of a correction and adjustment to changing Fed policy expectations, says Bank of America/Merrill Lynch.

Emerging markets are merely stirred, not shaken, BofA/Merrill concludes in its monthly global emerging market report. Indeed, equity and bond assets are now boasting positive returns after the late-spring selloff. The iShares MSCI Emerging Markets exchange-traded fund (EEM) is down more than 3% in May, bringing its year-to-date return to 3%. The iShares JPMorgan USD Emerging Markets Debt ETF (EMB) is down 0.4% this month, and is up 5% this year.

The worst performances this month are not surprisingly in some of the weakest economies — in terms of growth, deficit and political turmoil: the iShares MSCI Turkey ETF (TUR) is down 13% in May, the iShares MSCI Brazil Capped ETF (EWZ) is down 12%, and the iShares MSCI South Africa ETF (EZA) is down nearly 9%.


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