This Week in Emerging Market Volatility – 7/19/2013

As the major US indexes continue to make new highs the emerging markets are trying to get on track.  Both the iShares MSCI Emerging Markets (EEM – 39.28) and iShares MSCI Brazil (EWZ-43.72) were higher with EWZ leading the way up over 3% on the week.  Apparently bargain hunters are coming in after the market was down over 20% from its peak.  It appears the Brazilian central bank is taking actions that the markets like along with a bit of a currency rebound for the Brazilian real.  The EEM got a boost from Brazil, but also China which reported what could be considered positive economic data last week.

The reaction of the volatility markets has been pretty dramatic with VXEEM dropping 9% and the index moving to a discount to the front month future contract while VXEWZ was down 8%, but the curve still has a bit of a backwardation look to it, although not nearly as much as the past few weeks.  Maybe a return to normalcy is on the horizon.

VXEEM VXEWZ

 

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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