India and Taiwan challenge China's dominance in emerging market equity portfolios, driven by regulatory challenges.

From Business Standard: 2024-07-12 22:33:01

The competition for top spot in emerging market equity portfolios is heating up, with Taiwan and India emerging as strong contenders against China. Taiwan and India now hold over 19% weightings each in the MSCI EM Index, as compared to China’s 22.8%. Investors are diversifying into these markets for opportunities in AI chipmakers and India’s infrastructure modernization. The shift is driven by the need to reduce risk associated with China’s dominant position and regulatory challenges.

At its peak in 2020, China accounted for 40% of the MSCI EM Index, which has since decreased due to regulatory crackdowns. Taiwan and India continue to rise, with Taiwan’s market capitalization at $2.6 trillion and India’s Nifty 50 Index hitting a fresh high. In contrast, Chinese stocks have seen minimal growth this year, prompting a call for policy clarity at the Third Plenum to address issues like the property crisis.

Earnings play a crucial role in determining investment preferences, with forward earnings estimates for Taiwan and India showing significant increases compared to China. Valuations remain a concern, with the Taiex Index and Nifty 50 trading at around 20 times forward earnings, much higher than MSCI China’s valuation of just above nine times. Despite this, emerging Asia ex-China’s equity markets have seen substantial net inflows, with tech hardware and semiconductor supply chain names emerging as winners in the region.



Read more at Business Standard: India, Taiwan threaten China’s top spot in emerging mkt equity portfolios | News on Markets