The Shanghai Index has run 24% off the December 4 low. Thursday night on Fast Money I warned of overbought conditions and it might be time to fade some strength before charging higher.
Remember when we said that for emerging markets to have a sustainable rally, China had to be leading the charge. Well it is — and emerging markets are not following.
In short – yes, and no. Emerging market currencies have undergone a massive re-rating over the last decade, but in many cases they are still undervalued on a purchasing power parity (PPP) basis.
While clearly a lagging indicator by definition, fund flows are kicking in and momentum for emerging markets remains strong in a world where the U.S. and Europe aren’t caving in.