Taiwan and India challenge China in emerging markets, leading to potential paradigm shifts in capital flows.

From West Island Blog: 2024-07-13 09:10:19

Competition for China’s dominance in emerging markets heats up as Taiwan and India gain momentum, with both countries now holding over 19% weightings each in the MSCI Emerging Markets Index. Investors seek diversification amidst China’s regulatory crackdowns and debt woes, leading to potential paradigm shifts in capital flows.

Taiwan’s market cap of $2.6 trillion, significantly lower than China’s, sees impressive gains with the Taiex Index surging 33% led by Taiwan Semiconductor Manufacturing Co. On the other hand, India’s Nifty 50 Index records over 12% growth in 2024, boosted by policy promises from Prime Minister Modi, while Chinese stocks remain lackluster.

The launch of EM Ex-China funds in 2024 signals a shift in investor preference, highlighting rising earnings projections in Taiwan and India compared to minimal changes in the MSCI China Index. Valuations could pose a challenge as Taiex Index and Nifty 50 trade at around 20 times forward earnings, significantly higher than China’s index.

Despite valuation concerns, capital inflows into emerging Asian markets excluding China have surged, with nearly $9 billion in net inflows recorded since June. South Korea, India, and Taiwan emerge as top recipients of capital, highlighting the growing interest in tech hardware and semiconductor supply chain names in the region.



Read more at West Island Blog: Taiwan and India Challenge China’s Dominance in Emerging Market Portfolios