Chart Of The Day: Emerging market equities are breaking down
Today's chart shows how South Korean exports, which are continuing to contract for several months in the row now, closely correlate with MSCI Emerging Markets Index, which unsurprisingly is breaking down from its technical triangle pattern.
South Korean export contractions have done a good job predicting many of the previous global slowdowns, as well as market corrections. These include: the 1997 Asian Financial Crisis, 1998 LTCM and Russian Crises; 2001 Tech Crash; 2008 Global Financial Crisis and 2011 Eurozone Crisis.
So what makes South Korean exports such a great barometer for the global economy and financial markets?
South Korea is an export powerhouse, focusing on both the new and old economy. Major exports include semiconductors, petrochemicals, machinery, automobiles, ships, steel, LCD and wireless communication devices. Major trading partners are China (25 percent of total exports), ASEAN (14 percent), the United States (10 percent) and the European Union (9 percent).
In my opinion, this makes it one of the best indicators to follow.