Volatility, liquidity hint EMs are due a rebound

New York: Emerging-market bulls are taking some solace from a lengthening list of signals suggesting a rebound is in order after the worst quarter since the 2015 China hard-landing scare.

As the MSCI Emerging Markets Index of shares languishes near a one-year low, measures of volatility, liquidity and funding costs are offering encouragement. Other indicators -- from the extended positioning of short bets and historically cheap valuations to the premium offered by developing-nation bonds — have already hit levels that signaled comebacks in the past.

Volatility in developing-nation stocks has soared during the recent sell-off, at the same time that it’s retreated for US equities. The divergence is now on par with occasions in 2001 and 2015 that preceded a bottoming in emerging-market shares relative to the S&P 500 Index, Jason Goepfert, president of Sundial Capital Research Inc. wrote in a note to clients Monday.