As a lifelong Chicago Cubs fan, there is one unfortunate phrase that I had to learn early on: “wait ‘til next year”. No matter how promising a season may have started for the team, every year since their last World Series title in 1908 has ended in sorrow (1984 in particular, for me). A similar story has unfolded this year for a different kind of “Cub”.
We posted several pieces early in the year on the various emerging markets known as the Asian “Tiger Cubs”. These markets – Indonesia, Malaysia, the Philippines and Thailand – began the year in promising fashion. While Malaysia was the laggard of the group, Indonesia and the Philippines experienced nice looking breakouts while Thailand appeared poised to do the same. We even suggested that they looked to be in the running early on for “stock market of the year”. Well, as any Cubs fan can tell you, a lot can happen between April and October – or August.
In viewing the Asian Tiger Cubs collectively, we constructed an equal-weight composite of the 4 markets.
Similar to its components, the Composite started the year out strongly. In late January, the Composite broke above its previous high closing levels from 2013 and 2014 and into all-time high territory. While the breakout looked promising, it did not stick. After reaching its peak in early April, the Composite failed to hold above the previous highs. Recently, it has accelerated its move to the downside. As of today, the Composite is down about 15% from its April highs and sitting at an 18-month low.
We will note 2 potential positives. First, there is no indication that the secular bull markets that these countries have been in for the past decade has run its course yet. However, that is a longer-term positive – like saying your team’s farm system is loaded with talent. Secondly, several of the markets are reaching or will soon reach important support levels. We would expect these levels to support at least a bounce in the indices. However, that is only a short-term positive – like when your team goes on an 8-game winning streak after they’ve already been eliminated.
In the intermediate-term, however, we don’t have much reason to bet on these markets.
While things looked promising early in the year, following the failed breakouts, any “market of the year” awards will likely have to wait ‘til next year for the Asian Tiger Cubs.
Even the Chicago Cubs stand a better chance this year…
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The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.