A Saudi man looks at stocks at the Tadawul Saudi Stock Exchange, in Riyadh, Saudi Arabia June 15.Hasan Jamali/The Associated Press
It used to be that a four- or five-day rally in emerging-market stocks was a big deal.
Not anymore.
Nowadays, if the stretch of gains, or losses, doesn't reach double digits, it almost feels inconsequential. Consider these runs: The MSCI Emerging Markets Index fell for 12 straight days from late May through early June, the longest streak since 1990; less than two months earlier, the gauge rose for 11 consecutive sessions, the longest rally since 2005. In the past six months alone, there have also been moves of eight and nine straight days.
This change, while perhaps not a permanent phenomenon, creates opportunities for aggressive investors looking to piggyback on the momentum and turn a quick profit in a market that has largely been flat since late 2011.
"Markets do trend, sometimes the reasons are not clear at the time," said Tony Hann, the head of emerging markets at Blackfriars Asset Management Ltd. in London. "Momentum trading certainly drives this type of move."
A trading strategy known as Rate of Change, which buys stocks when they're on an upward trend and sells them when they're falling, would have returned 33 per cent this year, according to data compiled by Bloomberg.
For traditional buy-and-hold investors, the market has gotten a lot tougher.
The sustained ups and downs have offset each other, leaving the benchmark index up less than 3 per cent this year. The MSCI index declined about 5 per cent in each of the past two years after gaining an average 20 percent annually in the decade through 2012.
That is because slowing earnings growth drives down stocks until bargain hunters come in and bid up prices, keeping the index yo-yoing without going anywhere.
"Emerging markets are still very much in their five-year range," said Nicholas Field, a London-based money manager at Schroders Plc, where he helps oversee $474-billion. "After a strong rally, they got high in the range, and so fell back."
The MSCI index rallied 7.5 per cent in April, the biggest jump since January 2012, after a rebound in oil prices boosted stocks in Russia and Brazil while slowing growth in the U.S. pushed back expectations of an interest rate increase from the Federal Reserve.
It has since given up the gains as a rout in the global bond market diminished investor demand for high-yielding assets. Emerging-markets stocks tumbled 4.2 per cent in May, and have lost 3.3 per cent this month.