This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Emerging Asia Continues to Underperform

NEW YORK ( TheStreet) -- Earlier in the month, I wrote about the troublesome scenarios developing in peripheral emerging market economies, and this week's performance in Southeast Asian equities helps confirm the bearish outlook. Relative to global stocks, the benchmark MSCI Southeast Asia Index has entered bear market territory and is falling at its fastest rate in more than a decade -- down 11% this month and more than 20% from its yearly high.

These declines have come largely as a result of reductions in foreign holdings, which have dropped for three straight months. In August, $2.2 billion in Indonesian, Philippine and Thai stock shares have been sold as investors look to avoid risk and position themselves for stimulus cutbacks from the Federal Reserve. Some outlets (such as state pension funds in Thailand and Indonesia) view these moves as a buying opportunity. But at this stage, there is little reason to believe we have reached a bottom in emerging market assets -- and more declines will likely be seen in coming months.

Negatives Outweigh the Positives

On the positive side, valuations look cheap. The MSCI Southeast Asia Index is now trading at 1.8 times net assets, which, for the first time in four years, is below the multiple seen in the MSCI All-Country World Index. But the negatives are overwhelming, and the bearish price momentum is not something that will be easily overcome. The Philippine Stock Exchange (PCOMP) has posted losses of 14% this month. The Jakarta Composite Index is lower by 13%, and the Thai stock benchmark (SET) has fallen 10% during the same period. The SET now trades at forward price-to-earnings ratio of 11, which is the lowest valuation in more than a year and firmly below the MSCI All-Country index (with its forward P/E of 13).

But when looking at things from a historical perspective, there is little reason to believe this bear market has run its course. Over the last 20 years, bear markets in the MSCI Southeast Asia Index have lasted an average of 10 months. The current bear market has been in place for just three months. Central banks in emerging Asia are looking for strategies to stabilize the financial environment but current account deficits in many of these regions have spooked foreign investors unwilling to take on the added risk with no indication of suitable rewards near term.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $130.42 0.00%
FB $80.41 0.00%
GOOG $555.48 0.00%
YHOO $44.45 0.00%
TSLA $207.19 0.00%

Markets

DOW 18,214.42 -10.15 -0.06%
S&P 500 2,110.74 -3.12 -0.15%
NASDAQ 4,987.89 +20.7530 0.42%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs