Taiwan and India are emerging as strong contenders to replace China in EM equity portfolios.

From BNN Bloomberg: 2024-07-12 20:00:00

The competition to replace China in emerging market equity portfolios intensifies as Taiwan and India emerge as strong contenders, commanding over 19% weightings each in the MSCI EM Index. Investors seek diversification, favoring Taiwan’s semiconductor industry and India’s tech sector amid China’s dwindling dominance due to regulatory crackdowns.

China’s weight in the MSCI EM Index has decreased from 40% in 2020 to 22.8%, causing significant losses for money managers. Taiwan’s market capitalization is less than a third of China’s, yet its Taiex Index has surged 33%, led by semiconductor gains. India’s Nifty 50 Index also reached new highs as policy stability boosts investor sentiment.

The number of EM Ex-China fund launches in 2024 nears record levels, highlighting the shift towards other emerging markets. Earnings play a crucial role, with forward estimates in Taiwan and India rising by at least 13%, contrasting with stagnation in China. Valuations are high but continue to attract investment, with emerging Asia ex-China seeing significant inflows.

Asia’s tech sector, particularly hardware and semiconductor companies, are deemed the real winners amid the global tech boom and AI advancements. The bullish sentiment for Asian tech supply chain names drives investments in markets like Taiwan and India over China, reflecting changing investor preferences.



Read more at BNN Bloomberg: Taiwan, India Threaten China’s Top Spot in EM Equity Portfolios – BNN Bloomberg