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New DM-EM Equity Convergence

By Marc ChandlerApr 08, 2014 11:00AM ET
www.investing.com/analysis/new-dm-em-equity-convergence-209002
New DM-EM Equity Convergence
By Marc Chandler   |  Apr 08, 2014 11:00AM ET
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This Great Graphic, created by Bloomberg, depicts the MSCI equity index for the developed countries (orange line) and the emerging markets (white line). 
The Developed And Emerging Markets
The Developed And Emerging Markets
The charts begins at the start of last year.  In the first several months of 2013, DM outperformed EM. The big EM sell-off coincided with first hint from the FOMC about tapering.  EM recovered and tracked the DM until October.  A new phase of divergence, with DM outperforming again lasted into early March.  
 
Since mid-March the performance is a study in contrasts.  MSCI emerging market equity index is up about 8.4%.  During the same time the developed markets index is up a little less than 1%.  
 
In the foreign exchange market over this period, the dollar-bloc is the strongest.  The AUD/USD is easily the best performer rising 3.3% against the USD, followed by the USD/CAD (1.7%) and the NZD/USD (1.5%).  The GBP/USD is a distant fourth, up 0.4%, and all this was recorded today.  The other major currencies have lost ground against the dollar this period. 
 
Among the emerging market currencies, the Brazilian Real (BZF) (5.8%), Columbian Peso (5.5%) and Turkish Lira (5.5%)  have led the advance.  The Chilean peso (3.5%) and the Russian rouble (3.0%) round out the top five.   As with the majors, the high yielding/high beta currencies has generally outperformed. 
New DM-EM Equity Convergence
 
New DM-EM Equity Convergence

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