In late April, we initiated a trade idea recommending investors to sell frontier markets and buy emerging markets. The trade was carried out by buying equal Dollar amounts of the iShares MSCI Emerging Markets Index (EEM, quote) and selling iShares MSCI Frontier 100 Index Fund (FM, quote) ETF.
Gazprom has already rallied 35% off the lows (in Emerging Markets you make the most money when things go from “terrible to bad”) and can’t seem to find any love off the China gas deal.
Not only have the last few FOMC Mins kicked yields higher, but the yield crunch was more about positioning than fundamentals.
While nothing works like that in trading, and while we were wrong on the overall direction of this spread for a good part of 2H’13, we are seeing some price action in this trade.
With markets under pressure and EM’s propensity to underperform during periods of downdraft for global markets, we are ready to adhere to some key technical levels on our MSCI Emerging Market (EEM) vs S&P 500 (SPY) spread trade.
If you have been riding the Yandex (YNDX, quote) roll-coaster over the last few weeks with highs and lows inspired by the Kremlin and earnings we remain committed to a valuation and fundamental call that takes the stock to $35.00 by mid-summer on growth in mobile ad spend and retail exposure through search.
Real money is made in Emerging Markets when you take risk: Yandex (YNDX, quote) has rallied 25% from intraday lows of last week when Putin attacked the “western” nature and linkages of the internet and technology players in Russia.