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1.Market Observations, 7.GEMs, 8.Was Sticky

1 May 2017 (AFR) – Why emerging market currency bulls should beware in May

[COMMENT: I found this article particularly interesting because it provides some support for the “Sell in May” idea. This is one of the many Share Market GEMs about which I have written in the past. I always felt that there needs to be more reasons for this GEM than simply the northern hemisphere summer. The observations included below seem to add weight to the argument, and help to further explain the reasons for weak financial markets in the May-June-July period.]

(1 May 2017, AFR, p22, by Lilian Karunungan and Yumi Teso)

‘Blame dividend payments, weddings in India, or simply plain profit-taking. Developing nation currencies could be in for a rough month in May, if history is any guide. The MSCI Emerging Markets Currency Index has fallen in May in the six of the past seven years, a seasonal quirk that’s prompted Citigroup and Credit Suisse Group to warn investors that the gauge’s five-month winning streak may be coming to an end.’ <snipped…>

‘ “The industry spends the first four months of the year building long positions in an effort to generate returns for the new year. This creates a vulnerability to a negative surprise.” It’s more than just coincidence, too. May is usually the peak month for dividend payments to offshore investors in Thai and Indonesia companies, pressuring their currencies to weaken, according to Masakatsu Fukaya, an emerging-market trader at Mizuho Bank in Tokyo.’

Read more at AFR.com (might need AFR login access, or try: AFR.com/trial)

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About robertbrain

Brainy's Share Market Toolbox. Read the honest truth about the sharemarket. Develop or fine tune your investing/trading strategies using share price charts (technical analysis), or learn about the investment strategies of others. Melbourne (Australia) based - supporting share market investors and traders to build wealth through smarter investing using my Share Market Toolbox arsenal of weapons to tackle the market.

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