Sentiment among investors in emerging-market equities has reached “panic” levels after a 15 percent price drop in three months, although this is a sign stocks may rise in the next six months, Citigroup Inc. said.
Emerging-market stocks have advanced an average 7.5 percent in six months and 23 percent in a year on past occasions when Citigroup’s “Whether Vane” has been at such levels, New-York-based analysts Geoffrey Dennis, Howard Park and Christina Wood wrote in an e-mailed note to clients dated yesterday.
The “Whether Vane” measures the VIX Index of volatility as well as the ratio of put options to call options and commodity prices, they said.
Citigroup lowered its recommendation on the MSCI Emerging Markets Index to neutral in a May 18 report, saying the gauge is no longer likely to outperform global equities amid concerns about the European debt turmoil.
The developing-nations gauge has fallen 15 percent from its year-high on March 2.