UBS equity strategist Geoff Dennis thinks the bull run on more than a few countries has run its course. These markets, outside of the United States and Europe, are too crowded.
Crowded markets are often indicators of momentum, but can be seen as too expensive for value investors. Based on the in-house models over at UBS, last week positioning became a more crowded for Colombia (GXG 23,09 +0,02 +0,09%), Mexico (EWW 66,95 0,00 0,00%), South Africa (EZA 39,60 -1,10 -2,70%), Peru (EPU 33,86 +0,13 +0,39%) and Egypt (EGPT 27,34 +0,03 +0,12%). The attached tickers are the big ETFs that investors tend to gravitate towards in those countries. UBS did not specificity any ETFs as being overbought.
In fact, based on the relative strength indicator, the Global X MSCI Colombia (GXG 23,09 +0,02 +0,09%) fund is not overbought and has been selling off all month. It now trades below its 50 day moving average.
The iShares MSCI All Capped Peru (EPU 33,86 +0,13 +0,39%) fund is right around the oversold mark, based on relative strength indicators.
For UBS, however, some of the most crowded markets are Qatar (QAT 17,56 +0,07 +0,41%) and Brazil (EWZ 31,83 -0,59 -1,82%), but none of them have an RSI that indicators the same thing as what UBS’ models are showing.
The least crowded markets for UBS are India (EPI 44,04 -0,65 -1,45%), Korea (EWY 63,28 +1,10 +1,77%), Taiwan (EWT 48,37 -0,95 -1,93%), United Arab Emirates (UAE 14,93 +0,06 +0,37%) and the Philippines (EPHE 27,54 -0,08 -0,29%). Ironically, of those least crowded, the Wisdom Tree India (EPI 44,04 -0,65 -1,45%) fund is the most overbought.
Last week, global emerging market ETF funds reported inflows of $703 million, erasing the prior week’s $280 million of outflows, according to EPFR Global. Emerging market investors continue to favor ETFs. They’ve recorded inflows of $131 billion since 2006 while long only mutual funds have reported outflows of $52 billion.
Year-to-date inflows into emerging markets are at a new high of $6.8 billion, which is better than the outflows of $31.6 billion, $8.9 billion and $6.7 billion in the first 10 weeks of the last three years, UBS said citing data from EPFR Global.