The market’s reaction to the Brexit vote has dropped the iShares MSCI Emerging Markets ETF (EEM) by nearly 6%, pushing it below its 25- and 50-day moving averages and negating our buy signal. With the Cabot Emerging Markets Timer flashing a red light, we’re ready to turn defensive, but will continue to let the performance of our stocks make the decisions.
Our only action today will be to sell half of our position in Credicorp (BAP), our Peruvian bank stock. This move will book some profit and lower our exposure to the financial sector, which figures to be under selling pressure until the global financial community can sort out the winners and losers. We will also move our remaining half position to a Hold rating.
We are concerned about the price action of Seaspan (SSW), but we already have the stock on Hold and see no immediate threat to the stock’s high dividend yield, which is the main reason we’ve held it for so long. You can consider selling half if you want to ratchet up your cash position, but we will keep the stock on Hold for now.
We recommended buying a half position in Tencent Holdings (TCEHY) in yesterday’s Update, so today’s price dip represents an unexpectedly cheap buying opportunity. You can go ahead and buy, though, as with every stock, we’ll be using a loss limit in case the market continues lower.
We will watch the action of the markets and our stocks closely, and will send additional Hotlines as necessary.
Sell: Half of Credicorp (BAP).