The emerging markets are re-emerging - waking back up - after stumbling badly in January, with many of the emerging market indexes and ETFs up 4-5% or more over the past three trading sessions.

Not to be left behind, Suntech Power Holdings (STP) and our other two fund holdings; Oriental Education (EDU) and China Finance Online (JRJC), have both tacked on nice gains as well.

What's going on? Wall Street and the investing public are voting that the hard sell-off of in January, which dragged down just about every market across the globe indiscriminately, may have been overdone. The growing perception is that the odds are favoring the upside.

I would still advise caution at this point, especially when investing in the high-beta emerging markets arena, as I believe there are more shoes to drop in the US, with sub-prime still spreading, a slowing economy and a more cautious consumer all posing potential threats. For now, the most important emerging markets developments will continue be the ones happening here at home.

Looking Forward:

This morning, US January retail sales figures came in better than expected which hints the US consumer may not be completely tapped out yet, and it's helping to boost international markets. Later today, multinational Coca-Cola announces earnings and business inventory data are released.

Thursday Bernanke speaks (always a potential danger to the markets -- just hard to gauge whether up or down!) and the international trade deficit is released (expect another big number).

Friday capacity utilization and industrial production numbers are out -- both meaningful, but don't expect anything like the huge market volatility last week's anemic ISM data caused.

Decoupling?

Decoupling refers to the common theme that emerging and international markets are beginning to trade more independently of the US markets and economy than historically and it has been the mantra over the past several years on Wall Street as money managers sought to diversify their risk into "non-correlating" assets which move independently of each other.

Widespread decoupling will happen some day, but not in the very near-term. That's why the emerging markets sold off so dramatically in January - no decoupling there! For the moment, the US economy and consumer still remain a big part of the international equation. However, if you know were to look there are always stocks and markets that are outperforming, so decoupling is there for those who dig deep enough and work hard enough to locate it. That's what we're here for!

The dynamics that are keeping the US and foreign markets in synch may moderate before long and we may see a better scenario for emerging markets again outperforming. Up until recently, just blindly buying a foreign ETF or company was usually enough to outperform the US markets. Not anymore. In transitional times like these you have to be cautious, picking and choosing your investments carefully and always on the hunt. At the moment, I'm picking and choosing my entry points - nibbling on small positions.

I will be updating you soon about the top picks currently on my emerging markets radar - companies ripe with potential. A couple near the top of my list: China Mobile (CHL) - with an incredible 301 million subscriber base and Chinese Internet search giant Baidu.com (BIDU). I'll tell you more when the timing is right.

Sentiment Matrix Coming Soon!

I'm putting the final touches on my emerging markets and currency "sentiment matrix" which will give you a color-coded matrix to help identify the underlying forces driving key emerging markets regions, countries and international currencies, to help you navigate the global markets more nimbly. So stay tuned!

Best wishes,
Jeff Manera

Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net