Outflow from Emerging Markets Offers Investment Bargains for the Savvy Investor, Says GCM Worldwide

The largest outflow from emerging- market funds in four years looks like a very good indication to purchase stocks (which have currently been deflated to their lowest valuations in nearly three years), say analysts at the investment firm of GCM Worldwide. Investors pulled close to eight billion dollars this week, the third highest such withdrawal on record, and over a full percent of assets under management. GCM Worldwide, however, points to the fact that the Emerging Markets Index jumped an average of 17 percent in the six month periods proceeding outflows of this scale during the past decade, showing strong gains on 92 percent of such occasions. Fund outflows have traditionally been a good signal for rallies, as they tend to show that the bulk of bearish investors have sold off already, says GCM Worldwide’s Andrew Clearey.

The strategy of buying emerging-market stocks after weeks when outflows exceed 1 percent of managed assets has historically produced average yearly gains of over 27 percent. This trend has held true for well over a decade, and, as such, has proven an extremely reliable (if under-reported) indicator of market rebounds. The last drop of this magnitude was in the fourth quarter of 2008, and was promptly followed by a 60 percent bump over the next year. This week’s drop in emerging-market share prices has resulted in a number of strong buying opportunities, Clearey confirmed. “It’s times like these that tend to produce the greatest opportunity for gain among forward-looking portfolio managers and individual investors, alike. While it may require being stout of heart, and the ability to absorb a measure of short-term loss, we’ve seen many fortunes made when opportunities like this exist to acquire solid stocks at artificially low, panic-driven, prices,” he continued.

In other news, the directors at GCM Worldwide continue to like the long-term prospects of many currently slumping commodities (including both zinc and copper) and are also enthusiastic about several currently artificially deflated stocks in the technology sector. Their current strategy is focusing both on undervalued stocks with good long-term prospects, as well as investments that are extremely promising as short-term holdings for the next three to six months.

GCM Worldwide is a New York based investment firm offering the entire range of financial, banking and investment services.

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This release was published on openPR.