Emerging markets thriving, excluding China, with positive outlook for EM stocks

From AI-CIO: 2024-07-19 16:14:40

China’s dominance in the MSCI Emerging Market Index has decreased from 40% in 2020 to 25% in 2024. Other EM nations like Taiwan and India have seen significant market increases while the Shanghai Composite has only risen 0.25% this year. Excluding China, the EM index has outperformed by almost two percentage points yearly over the past five years.

China’s economic struggles post-pandemic have impacted its equity market, with losses exceeding $4 billion since 2021. U.S. pension funds have heavily invested in China, though some are now reducing their EM allocation. Emerging markets, excluding China, have been outperforming and are showing a greater breadth in performance compared to China.

Declining global interest rates are expected to benefit emerging markets, including those that are expected to cut interest rates further. Ned Davis Research recommends maintaining overweight exposure to the MSCI EM index, excluding China. Many other EM central banks have cut interest rates over the past year, but China has not reduced its rate since 2015.

Emerging markets have been thriving, aside from China, which has not participated in the EM surge, according to the Ned Davis report. The outlook for EMs remains positive, with increased breadth in performance across the board. Ned Davis suggests caution but maintaining exposure to the MSCI EM index, excluding China, as a favorable option.



Read more at AI-CIO: EM Stocks Doing Better, Except for Drag From China, Ned Davis Says