Emerging Market Bargains May Lie in Communication, Tech Stocks

(Bloomberg) -- Investors looking for bargains in emerging markets after three weeks of steep declines may want to start with communications and tech shares.

Stocks from both sectors are the most oversold among 11 developing-nation equity sectors, according to their relative-strength indexes -- a momentum indicator based on recent price changes. Both industry groups have an RSI under 20, well below the 30 typically regarded as the threshold for oversold.

Three others groups -- real estate, health care and consumer discretionary -- can also be considered oversold, as well as the benchmark itself, which has been trading with an RSI below 30 for the past two weeks.

Developing-nation stocks have fallen more than 8% this month amid increased trade tensions. All sectors are down, with the worst performing one being consumer discretionary, which fell 12.8%, followed by a 12.5% slump in communication services companies. Tech stocks, which were hit worldwide after the U.S. said it would blacklist China’s Huawei, are down 11.8% in emerging markets.

©2019 Bloomberg L.P.