Back to the complete issue
Tuesday, 16 May 2017

On “overheating” emerging markets stock and the search for “smart beta”

Red Hot Emerging-Market Stocks Are Showing Signs of Overheating,” Bloomberg warns this morning, writing that “after the MSCI Emerging Market Index’s surge of about 17 percent this year, momentum indicators suggest the rally is losing steam.” Why? It’s all technical mumbo-jumbo. “The benchmark is approaching a resistance level formed by the trend line connecting the peaks in 2011, 2014 and 2015. While breaking above it would be a bullish omen, other technical signals also point to some overheating.”

Elsewhere this morning, if you manage other people’s funds and have any concerns about job security amid the rise of index funds and robo-advisors, go check out the Financial Times’ “2,000% rise in new money allocated to smart-beta funds,” which notes that, “Smart-beta funds, which act as a halfway house between active and passive management, drew a net USD 24 bn in the first three months of the year, up from USD 1 bn during the same period in 2016” as investors sought out what a BlackRock guy calls “efficient low-cost access to persistent drivers of returns.” Smart-beta funds now account for nearly 15% of the USD 4 tn invested in global ETFs, the Financial Times reports.

So what’s a smart-beta fund? In a sentence, an index fund that’s been ‘tweaked’ in the hope of generating “above-market returns, such as by excluding volatile stocks.” This video from Sara Shores, BlackRock’s global head of smart beta, dives a bit deeper (watch 3:04).

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.