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Emerging Market Equities Post Marginal Gains

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Apr. 29 2015, Updated 12:06 a.m. ET

Marginal gains

The iShares MSCI Emerging Markets ETF (EEM) extended its gains from early April into last week ended on April 17, 2015. The fund marginally increased by 0.12%. The emerging market equities like European (EFA) and US (SPY) equities gave up their gains from the week on the last day of the week due to weak global news.

The Securities Association of China increased the number of stocks that investors can short sell. The SAC also allowed fund managers to lend shares for short selling. The changes triggered heavy selling in Chinese futures.

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Jasper Lawler, market analyst at CMC Markets, said, “any sort of regulation for the market, particularly one so buoyant like that in China, is never seen as a good thing as it’s literally a physical impact on the kind of trading that can be done. The actual trading itself is getting limited, potentially.”

Impact on asset managers

Stock market performance is a key driver of asset managers’ revenues. Performance flows directly to earnings and share prices. Some of the companies that will benefit from a rise in emerging market equities are BlackRock (BLK), Goldman Sachs (GS), Fidelity Investments, HSBC Asset Management (HSBC), Franklin Resources (BEN), and Blackstone (BX).

The equities of major emerging markets like China and India have risen on the sentiment that reforms are underway and would help the growth in the countries. The market has already priced in the growth, but the sustainability of that will depend on how the companies respond to the quarterly earnings, which will be announced over the next few weeks.

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