The old saying goes, “When the U.S. sneezes, the rest of the world catches a cold.” But what about when Europe gets the flu and when China and India drink the tap water from Latin America? There have been many books about the Post-American economies and about the rest of the world catching up to America’s fiscal dominance. It turns out that our leverage isn’t so bad when you consider some of the other great nations. The recession in America is still only an unofficial and debated recession, but the recession in Europe and the equivalent of a recession is heading back to the developing nations.
All you have to do is look at the exchange-traded funds and closed-end which track the emerging markets and the BRIC nations (and those surrounding the BRICs). Ugly is not quite the right description and we will explain more after showing just how bad the carnage is. Greece is no emerging market, but it is on the path to default faster than emerging markets used to default.
The ETFs for the broad emerging markets is not a good signal for their equity markets. The revolutions of early 2011 did not help, nor did the food inflation, but the economic slowing is taking a hit here left and right. iShares MSCI Emerging Markets Index (NYSE: EEM) closed down 2.1% at $34.36 and the 52-week trading range is $34.29 to $50.43 (52-week low was Monday). Vanguard Emerging Markets Stock ETF (NYSE: VWO) closed down 1.75% at $35.20 and the 52-week trading range is $35.13 to $50.92 (52-week low was Monday).
We have included the most active ETF chart on each from Stockcharts.com at the end of this report. The data on the BRICs is almost shocking…
Brazil may have energy independence and the Olympics headed its way, but the implosion there has been massive. The BOVESPA lost 2.9% of its value on Monday and let’s just say that its high-flyers are now grounded due to more than just weather. It seems that minerals and forestry are not going to generate cash, just like it missed out on royalties from the term “Brazilian” in personal grooming.
iShares MSCI Brazil Index (NYSE: EWZ) closed down 2.1% at $50.89 and the 52-week trading range is $50.71 to $81.77 (52-week low was Monday). Market Vectors Brazil Small-Cap ETF (NYSE: BRF) closed down 3.15% at $37.96 and the 52-week trading range is $37.73 to $63.78 (52-week low was Monday). iShares MSCI Chile Investable Market Index (NYSE: ECH) closed down 3.8% at $51.16 and the 52-week trading range is $50.92 to $80.38 (52-week low was Monday). Aberdeen Chile Fund, Inc. (NYSE: CH) closed down 4.9% at $13.45 and the 52-week trading range is $13.37 to $26.56 (52-week low was Monday).