Utilities, Precious Metals, Real Estate, Canada, France are among the worst

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Overall emerging markets are suffering from flight to dollars. The triple surpluses that emerging markets had created i in the environment of higher commodities prices and lower rates are vanishing as sovereign reserves are spent on supporting local currencies, current accounts are suffering from commodities weakness, while budgets are suffering from rising borrowing costs. We are favoring South Africa, Turkey and Brazil in our tactical selection. While in the longer term we like India and China as well. Also in our monthly publication we started to cover Canada and Australia as countries somewhat dependent on commodities prices and outlook for its economic growth. We are more positive on Canada in our tactical view. Sentiment towards Russia is very negative due to politics as well as oil price. In addition Russia is in the pre-election mode which usual is not boding well for the markets. Devaluation creates headwinds for China. China has been a long beneficiary of weaker oil prices as an importer. However this year FX weakness created additional pressures for China buyers. Weaker yuan implies less purchasing power from oil importers and as a results weaker oil prices. The same argument works for other commodities that are imported by China. South Africa stocks are expected to be somewhat supported given the resilience in precious metals prices, but SA consumer sectors can be under pressure due to profit taking. South Korea performance has been suffering due to its link to China as overall region is plagued by expectations of China economic problems. Despite the gloom in the region, and possibly implications for SK debt, South Korea as well as other more developed Asian countries are actually gaining a bit from Chinese rising welfare per capita. India started 2016 weaker. Perhaps investors fearing that emerging markets are up for a rough ride in 2016 are taking whatever profits that can salvage in a 2 years of despair. Still the sentiment towards India remains quite upbeat. India has proven to be quite resilient in the previous 2 years and there is no reason to believe that something fundamentally changed in India. Turkey is surprisingly resilient given the challenges in its external affairs such as the fallout with Russia, further involvement into Syria as well as increased tensions with Kurds. Markets have been ignoring all of that. Here again just like in the case of Brazil there will be investors who will be overweighting Turkey vs. Russia, given that Russia did so much better than Turkey in 2015. Turkey is surprisingly resilient given the challenges in its external affairs such as the fallout with Russia, further involvement into Syria as well as increased tensions with Kurds. Markets have been ignoring all of that. Here again just like in the case of Brazil there will be investors who will be overweighting Turkey vs. Russia, given that Russia did so much better than Turkey in 2015.Brazil has been doing a bit better lately as reais stopped its fall and iBovespa pushed off the bottom. The advocates for Brazil case are likely to point out to Brazil under performance in 2014 and 2015. But its success in 2016 will depend on overall commodities outlook and sentiment towards overall emerging markets. Aiding to Brazil case will be investors cashing out on Russia (given that Russia has been quite resilient in 2015) and switching into Brazil. In our monthly publication we started to cover Australia as a resource driven country dependent on commodities prices and outlook for its economic growth. Unfortunately Australia outlook is very closely linked with China and that ads to the negatives for Australia. In our monthly publication we started to cover Canada and Australia as countries somewhat dependent on commodities prices and outlook for its economic growth. It is difficult to argue at the present that all commodities prices will be better in 2016 than in 2015, given the glut in oil and glut in steel in China, but precious metals have been supported so far in 2016 and fertilizers could be some what supported as well which will add to the the strength factors for the Canadian economic outlook and markets.