As per our annual global market forecasts we expect emerging stock markets to be mildly bullish. We explained our viewpoint in great detail in our Emerging Markets Outlook for 2020 and 2021, and concluded this: “Our annual outlook for emerging markets is mildly bullish going into 2020 but strongly bullish for 2021. More importantly really profitable opportunities will be found in country specific sectors.” With that said it is clear that not all emerging markets, as one big group, collectively will do well in 2020. On the contrary a few will do well, some will be neutral and some will be bearish in 2020. These market conditions require a selection of the top emerging markets for 2020. It is imperative, for success, to monitor all emerging markets continuously in 2020 until we have confirmed that our selection of 4 top emerging markets will indeed be outperformers in 2020. This validation is what is required for any forecast, first and foremost our 2020 forecasts.
One important thing that many investors tend to forget is the level of maturity of a bull vs bear market.
The more mature a bull market the easier to pick any stock or country in that bull market. However, in the early stages of a bull market it really is a stock pickers market, and it may require 2 or 3 attempts before hitting the best performer.
Which emerging market will be the outperformer in 2020? We identify 4 emerging stock markets with the potential to outperform in 2020, and one or a few of them will eventually become the outperformers.
Summary of our emerging markets outlook for 2020
First of all we must stay focused on the conditions for our mildly bullish emerging markets forecast. If these conditions won’t come true it will invalidate our emerging markets outlook, and potentially invalidate our top 4 emerging markets forecast in this article.
We said that 2020 should be a mildly bullish year for emerging markets based on the 3 conditions:
- China’s stock market (SSEC) does not structurally break below 2700 points.
- The Euro may decline but not at an accelerated rate.
- Emerging currencies continue to build their base, and the CEW basket does not fall below 16.90.
If (that’s a big IF) the opposite of multiple of the above criteria would occur it would invalidate our mildly bullish emerging markets outlook for 2020.
Brazil #1 top emerging markets in 2020 with strong ongoing bull market
Not only on our list but also in this economics based top emerging markets list do we find Brazil on the top spot.
Brazil’s monthly chart is embedded below. It shows a powerful bull market which is set to continue in 2020.
As long as the medium term uptrend (line) is respected Brazil is set to move higher.
How much higher? Starting from the 70k breakout level in the Bovespa Stock Index in the 2nd part of 2018 we may reasonably assume that it will peak after hitting 140k in the next 24 months approx.
This is not an exact forecast though, it is a directional forecast.
Australia #2 top emerging markets in 2020 with continued bull market
As explained in great detail in our Australian Stock Market Outlook for 2020 and 2021 we expect Australia’s stock market to continue to be bullish in 2020 and 2021.
In both years we expect a return, bottom to top, of 30%.
Interestingly this week we saw the start of a short to medium trend change: ASX Index In Australia Turns Bullish Again Going Into 2020.
We expect Australia to continue to be bullish, and to be one of the top performers in the group of emerging stock markets in 2020.
Vietnam breakout candidate for spot #3 in the top emerging markets in 2020
Vietnam trades at a breakout point currently.
Below is the Vietnam stock market Index which makes clear that this index trades at a breakout point!
In the context of a huge rising channel we see this peak in the first half of 2018 which was followed by a retracement and consolidation in the last 18 months.
The consolidation has the shape of a rounding bottom, or to be more precise a ‘saucer base’.
This formation is close to resolution, and we expect 2020 to show the way higher for Vietnam’s stock market. The upside potential is significant: a minimum of 50% upside, with the base projection being 75% upside from the breakout level at 1,000 points.
China candidate to become an outperformer in 2020
China may or may not be the outperformer in 2020. So it requires close monitoring as well as fast reactions.
China has a track record of being volatile and ‘fickle’. That’s why its long term chart has a few aggressive spikes higher which tend to last a few months only. The remaining time China’s stock market is moderate at best, and ugly the rest of the time.
As per our China Stock Market Outlook For 2020 And 2021 the line in the sand is 3,400 points in the Shanghai Stock Exchange SSEC. If and when the SSEC rises above this level it will be off to the races, and we’ll see another spike in less than 6 months.
So it’s a matter of monitoring closely and acting fast when it comes to China.
The flipside is if the SSEC fails to remain in this 2 decade long rising channel. If the SSEC closes for 3 consecutive months below 2,800 points it may spell a big crash. Not likely, but protection is the number #1 and we always MUST be aware of the downside risk (also identify when it starts)!
We consider China the ‘joker’ in the game for 2020.
Which emerging market to invest in for 2020?
This article does not imply that we have to invest in all 4 of the stock markets mentioned in this article. On the contrary it says one or two will be outperformers, and we want to follow them closely to identify those one or two!
How to follow this up?
First of all we follow up on all our forecasts with our Free Forecasting Newsletter >>. Sign up for free to get updates if and when we see important trend changes or confirmations of our forecasts take place!
More importantly we are about to launch our MOMENTUM INVESTING as well as TRADE ALERTS services. In both we look at emerging markets, and play them as opportunities arise. Want to know when we launch these, and ride the emerging markets waves with us? Then sign up for our Free Newsletter to get the announcement of our new premium services which are meant to double capital (or even much more than that) each year!
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