Why emerging markets value equities are breaking with historic USD sell-off patterns: That emerging markets equities rallied 25.3% just as the USD’s value in trade-weighted terms fell 9.4% this year should not come as a surprise. Yet when we look deeper at the performance of EM value stocks, one notices this pattern collapsing in this latest rally, writes the FT’s Steve Johnson. Since 2000, value stocks had outperformed growth equities in every USD sell-off cycle with the exception of this latest one. The correlation between USD sell-offs and the ratio value and growth stocks over the past four cycles had averaged 85%. This fell to -89% this year, says Geoff Dennis, head of global EM equity strategy at UBS.

This “anomaly” is reflection of changes in the fortunes of key emerging markets sectors. Historically, energy and commodities stocks have strongly outperformed the MSCI EM index as a whole during periods of USD weakness, while IT stocks have markedly underperformed. With EM IT stocks bolstered by growth in China (particularly from internet stocks such as Alibaba and Tencent) and energy prices plummeting, insiders, including JP Morgan’s chief investment officer for EMs Richard Titherington, believe this shift is behind the break with history.