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Stocks in Vietnam, Sri Lanka and Serbia have outpaced the rest of the world since April, with benchmark indexes for each rising more than 32 percent. That means it’s time to sell equities throughout the developing world, some of the biggest money managers say.
The last time the smallest emerging markets led a rally, in 2007’s fourth quarter, bullish investors predicted that developing economies would break free of the U.S. recession’s shackles. They were wrong.
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“You often see frontier markets outperforming at the end” of a rally, said Arjuna Mahendran, the Singapore-based chief investment strategist for Asia at HSBC Private Bank, which managed $433 billion at the end of 2008. “There’s a chance of a sharp correction.”
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Developing-nation equities already are slipping from this year’s highs after price-to-earnings ratios made them more expensive than any time since December 2007. Investors are pulling money from emerging-market stock funds for the first time since March amid concern that a global recovery will take longer than economists predicted....
