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

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Emerging markets are going through the spike in risk appetite mainly driven by strong performance of commodities exporters where many of them are bouncing off their trough levels. Importers such as China and India markets have been lagging. But even in China and India materials sectors have been among the best performing vs. other sectors. Russia is likely to remain among small net positive performers so far this year. The downside is quite limited given that so much bad things are in the price. Further upside depends on oil price, which has been supportive lately. Oil price outlook is a black box, but overall the expectations have been bad especially given the “do nothing agreement” where countries agreed to freeze output when they in fact have been operating at or above the full capacity levels. China stocks have been dreadful YTD. But just recently China economy has been supported by weaker yuan as evidenced by record net exports. In addition PboC has been in a mild QE mode injecting 15bn$ into economy lowering reserve requirements. China materials sector has been showing top performance which is good news, the markets have not seen for a while. South Africa resource stocks skyrocketed this year, first as a result of strength in gold price and then later on, on the back of overall strength in commodities prices lately. Consumer stocks and banks has been lagging however. We do not expect overall turnaround in commodities prices therefore we view the strength in commodities South Africa Stocks as fairly speculative. South Korea stocks have limited downside yet to identify sectors that have upside are difficult. One sector that could be quite attractive - Korean energy stocks that benefit from lower energy prices. Indian stocks are suffering and significantly under-performing overall GEM index. The reason is that India reported GDP growth of 7.3% significantly below 7.7% expected. Also significant previous out-performance of India gave in to the speculative idea to chase commodities exporters i.e. Russia and Brazil. We think that long term interest towards Indian stocks is still there although the expectations could have been scaled down a bit. Turkey has been performing strongly despite all its geopolitical problems. Materials stocks have been leading the gains among Turkish stocks. CBT has been somewhat supportive of asset prices holding rates still despite slightly higher inflation. Brazil and Russia competed with each other in economic declines. Brazil economy declined 3.8% in 2015. The stocks have been quite week YTD but in February Brazil stocks turned around posting one of the best performances. We like Brazilian banks on the back of reais returning to strength vs USD. Australian as well as Canada stocks are likely to pick up in March given that the speculative trade in commodities is likely to continue in March.