Options traders are making more bets than any time since 2009 that emerging market equities will climb after valuations fell to the lowest levels in three years.
The ratio of calls to buy the iShares MSCI Emerging Markets exchange-traded fund has jumped to a 22-month high of 0.80-to-1, up from 0.65 a month ago and the 0.59 average since 2006, according to data compiled by Bloomberg. Calls that pay if the fund climbs 4.2 percent to $42 by December are the fastest- growing bet and now account for the largest share of the ETF’s 5.46 million options.
Stocks in developing countries are rebounding from the longest losing streak in more than a decade as countries from Turkey to Brazil cut borrowing costs. While bears say the stocks will decline as inflation and Europe’s debt crisis crimp growth, bulls say smaller government debt levels give policy makers more ammunition to keep their economies expanding. The MSCI Emerging Markets Index has risen more than 20 percent since its Oct. 4 low, meeting the common definition of a bull market.
“These countries are still poised to move ahead,” James Swanson, who oversees about $208 billion as chief investment strategist at Boston-based MFS Investment Management, said in a telephone interview yesterday. “The long-term story is intact, the stocks are depressed by historic standards and they trade at very low multiples.”
Open interest for the iShares ETF’s December $42 calls has surged to 191,220 contracts from 29,101 at the end of last month, the biggest gain among its options, according to data compiled by Bloomberg.
Widely Owned
The increase made the contracts the most widely owned among the fund’s 2.46 million calls and 3.01 million puts, followed by December $45 calls with an open interest of 127,769, the data show. The ETF hasn’t closed above $45 since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating. It increased 1.8 percent to $40.31 yesterday.
Options on the emerging markets ETF had the 12th highest volume on U.S. equity derivatives exchange in the first three quarters of 2011, according to data from the Chicago-based OCC, which clears and settles all trades. It was the highest volume for ETFs tracking non-U.S. stocks.
The price of protection is falling among the largest emerging nations’ equities. Volatility for India’s S&P CNX Nifty index dropped 39 percent from its 25-month high on Oct. 4, while the Russian Volatility Index tumbled 37 percent from a 29-month high the same day, data compiled by Bloomberg show.
VIX, VStoxx
In the U.S., the Chicago Board Options Exchange Volatility Index, or VIX, sank 34 percent from its Oct. 3 high to 29.86 yesterday. It slid 15 percent to 25.24 as of 12:28 p.m. in New York today. Europe’s VStoxx Index (V2X), which measures the cost of Euro Stoxx 50 Index options, plunged 25 percent from Oct. 4 through yesterday. The gauge tumbled 20 percent, the most since May 2010, to 30.34 today.
Investors increased purchases of emerging-market equities after the MSCI Emerging Market Index’s five straight monthly declines drove its price-earnings ratio to 9.5 earlier this month, the lowest since December 2008. The equities have trailed advanced-nation stocks for four quarters, the longest streak since Russia’s default in 1998, amid concern that a global economic slowdown will hurt emerging markets more.
ETFs tracking emerging markets received $1.5 billion in new money during October, the most in six months, according to data compiled by TrimTabs Investment Research. The securities got $1.4 billion a month on average during the first two years of the bull market that began in March 2009, the data show.
Valuations won’t matter and emerging-market shares will resume declines should Europe’s debt crisis worsen and spur a global recession, according to Enrique Alvarez, head of Latin America research at IDEAGlobal in New York.
Developing Countries
Stocks in developing countries trailed advanced-nation shares during six periods of financial stress that sparked global losses in the past two decades, including Latin America’s so-called Tequila Crisis in 1994 following a devaluation of the Mexican peso. The peak-to-trough drop in the emerging-market index was 12 percentage points bigger on average during the six retreats, according to data compiled by Bloomberg.
“One risk is that if we have something disorderly in Europe, and the risk of that is growing day by day, the contagion effect could roll into U.S. banks and then emerging markets,” Alvarez said in a telephone interview yesterday.
The MSCI gauge for developing countries has surged 16 percent from its two-year low on Oct. 4, beating the 11 percent advance by the Standard & Poor’s 500 Index and the Stoxx Europe 600 Index.
Debt Levels
Developing nations have less debt. Government debt in major economies will amount to 107 percent of gross domestic product next year, up from 94 percent in 2009, according to data compiled by the International Monetary Fund. In emerging markets, the average debt-to-GDP ratio will fall to 34 percent from 35 percent, according to the IMF.
Developing countries are likely to expand 6.4 percent this year and 6.1 percent in 2012, according to the IMF forecasts in September. That compares with the average growth rate of 1.6 percent and 1.9 percent in the developed world.
Equities advanced worldwide after data showed the U.S. economy was improving. The Citigroup Economic Surprise Index, which shows the degree to which reports top the median projection in Bloomberg surveys, turned positive this month for the first time since April.
‘Vote of Confidence’
“The story in emerging markets is more of a vote of confidence not just for those markets, but also the developed world not going into a recession,” Brian Jacobsen, who helps oversee $209.1 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said in an Oct. 25 telephone interview. “Central banks are going to be putting the pedal to the metal.”
Manufacturing in China , the biggest emerging market, may expand in October for the first time in four months, snapping the longest contraction since 2009, after a preliminary index of purchasing managers showed a rebound in new orders and output. China region ETFs took in $796 million this month, the most since 2009, according to TrimTabs.
The threat of inflation is easing. The S&P GSCI Agriculture Index of commodities tumbled a record 19 percent in September. Indian central bank Governor Duvvuri Subbarao said yesterday that he’s “reasonably confident” of meeting a target of reducing inflation to 7 percent by the end of March.
“There are clear signs that we should enter emerging markets and start to accumulate,” Dong-Sihn Ngo, who helps oversee $752 billion as chief strategist for emerging markets and Asia Pacific at BNP Paribas Investment Partners in Hong Kong, said in a telephone interview. “You have Indonesia cutting interest rates and India saying they may stop hiking rates and maybe China will give this kind of signal soon.”
bloomberg
The ratio of calls to buy the iShares MSCI Emerging Markets exchange-traded fund has jumped to a 22-month high of 0.80-to-1, up from 0.65 a month ago and the 0.59 average since 2006, according to data compiled by Bloomberg. Calls that pay if the fund climbs 4.2 percent to $42 by December are the fastest- growing bet and now account for the largest share of the ETF’s 5.46 million options.
Stocks in developing countries are rebounding from the longest losing streak in more than a decade as countries from Turkey to Brazil cut borrowing costs. While bears say the stocks will decline as inflation and Europe’s debt crisis crimp growth, bulls say smaller government debt levels give policy makers more ammunition to keep their economies expanding. The MSCI Emerging Markets Index has risen more than 20 percent since its Oct. 4 low, meeting the common definition of a bull market.
“These countries are still poised to move ahead,” James Swanson, who oversees about $208 billion as chief investment strategist at Boston-based MFS Investment Management, said in a telephone interview yesterday. “The long-term story is intact, the stocks are depressed by historic standards and they trade at very low multiples.”
Open interest for the iShares ETF’s December $42 calls has surged to 191,220 contracts from 29,101 at the end of last month, the biggest gain among its options, according to data compiled by Bloomberg.
Widely Owned
The increase made the contracts the most widely owned among the fund’s 2.46 million calls and 3.01 million puts, followed by December $45 calls with an open interest of 127,769, the data show. The ETF hasn’t closed above $45 since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating. It increased 1.8 percent to $40.31 yesterday.
Options on the emerging markets ETF had the 12th highest volume on U.S. equity derivatives exchange in the first three quarters of 2011, according to data from the Chicago-based OCC, which clears and settles all trades. It was the highest volume for ETFs tracking non-U.S. stocks.
The price of protection is falling among the largest emerging nations’ equities. Volatility for India’s S&P CNX Nifty index dropped 39 percent from its 25-month high on Oct. 4, while the Russian Volatility Index tumbled 37 percent from a 29-month high the same day, data compiled by Bloomberg show.
VIX, VStoxx
In the U.S., the Chicago Board Options Exchange Volatility Index, or VIX, sank 34 percent from its Oct. 3 high to 29.86 yesterday. It slid 15 percent to 25.24 as of 12:28 p.m. in New York today. Europe’s VStoxx Index (V2X), which measures the cost of Euro Stoxx 50 Index options, plunged 25 percent from Oct. 4 through yesterday. The gauge tumbled 20 percent, the most since May 2010, to 30.34 today.
Investors increased purchases of emerging-market equities after the MSCI Emerging Market Index’s five straight monthly declines drove its price-earnings ratio to 9.5 earlier this month, the lowest since December 2008. The equities have trailed advanced-nation stocks for four quarters, the longest streak since Russia’s default in 1998, amid concern that a global economic slowdown will hurt emerging markets more.
ETFs tracking emerging markets received $1.5 billion in new money during October, the most in six months, according to data compiled by TrimTabs Investment Research. The securities got $1.4 billion a month on average during the first two years of the bull market that began in March 2009, the data show.
Valuations won’t matter and emerging-market shares will resume declines should Europe’s debt crisis worsen and spur a global recession, according to Enrique Alvarez, head of Latin America research at IDEAGlobal in New York.
Developing Countries
Stocks in developing countries trailed advanced-nation shares during six periods of financial stress that sparked global losses in the past two decades, including Latin America’s so-called Tequila Crisis in 1994 following a devaluation of the Mexican peso. The peak-to-trough drop in the emerging-market index was 12 percentage points bigger on average during the six retreats, according to data compiled by Bloomberg.
“One risk is that if we have something disorderly in Europe, and the risk of that is growing day by day, the contagion effect could roll into U.S. banks and then emerging markets,” Alvarez said in a telephone interview yesterday.
The MSCI gauge for developing countries has surged 16 percent from its two-year low on Oct. 4, beating the 11 percent advance by the Standard & Poor’s 500 Index and the Stoxx Europe 600 Index.
Debt Levels
Developing nations have less debt. Government debt in major economies will amount to 107 percent of gross domestic product next year, up from 94 percent in 2009, according to data compiled by the International Monetary Fund. In emerging markets, the average debt-to-GDP ratio will fall to 34 percent from 35 percent, according to the IMF.
Developing countries are likely to expand 6.4 percent this year and 6.1 percent in 2012, according to the IMF forecasts in September. That compares with the average growth rate of 1.6 percent and 1.9 percent in the developed world.
Equities advanced worldwide after data showed the U.S. economy was improving. The Citigroup Economic Surprise Index, which shows the degree to which reports top the median projection in Bloomberg surveys, turned positive this month for the first time since April.
‘Vote of Confidence’
“The story in emerging markets is more of a vote of confidence not just for those markets, but also the developed world not going into a recession,” Brian Jacobsen, who helps oversee $209.1 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said in an Oct. 25 telephone interview. “Central banks are going to be putting the pedal to the metal.”
Manufacturing in China , the biggest emerging market, may expand in October for the first time in four months, snapping the longest contraction since 2009, after a preliminary index of purchasing managers showed a rebound in new orders and output. China region ETFs took in $796 million this month, the most since 2009, according to TrimTabs.
The threat of inflation is easing. The S&P GSCI Agriculture Index of commodities tumbled a record 19 percent in September. Indian central bank Governor Duvvuri Subbarao said yesterday that he’s “reasonably confident” of meeting a target of reducing inflation to 7 percent by the end of March.
“There are clear signs that we should enter emerging markets and start to accumulate,” Dong-Sihn Ngo, who helps oversee $752 billion as chief strategist for emerging markets and Asia Pacific at BNP Paribas Investment Partners in Hong Kong, said in a telephone interview. “You have Indonesia cutting interest rates and India saying they may stop hiking rates and maybe China will give this kind of signal soon.”
bloomberg
No comments:
Post a Comment