Emerging Markets Insights: China steps up

Chinese policymakers have implemented significant stimulus measures to counter economic downturn and deflation, with potential links to the US Federal Reserve’s interest rate cuts and a weaker US dollar. In the Middle East, escalating tensions between Israel and Iran are affecting regional markets and global oil prices, though a full-scale conflict remains unlikely in the short term.

As the US election approaches, market focus is on the potential implications of a divided Congress, which historically provides checks and balances on fiscal policy. Emerging markets (EMs) saw positive performance in Q3 2024, with the MSCI EM Index rising 8.88%.

China benefited from stimulus measures and positive market developments, while India continued to see strong economic data and foreign inflows. In contrast, South Korea and Taiwan’s tech-heavy markets were impacted by fading AI optimism.

Latin American equities advanced, though concerns remain around Argentina’s banking sector and Mexico’s judicial reforms. Central banks in the Middle East and South Africa followed the US Fed’s rate cuts, while Brazil raised rates to combat inflation.

Portfolio managers remain cautious but optimistic, relying on a bottom-up investment approach and on-the-ground insights to navigate these evolving market conditions.