Emerging stocks are entering a bullish phase

The MSCI Emerging Market Index, the benchmark, is up 20% from its lows.

The MSCI Emerging Markets Index (MSCI EM) is up 20% from its lows of Oct. 26. This rise means entering a bullish scenario, according to market theory. During that period, the MSCI EM performed significantly better than the indices No less important are the Euro Sotxx 50, which rebounded by 13.5%, and the Dow Jones Index, which barely registers 1%.

The falling dollar and reopening of China provide oxygen to emerging markets. This is a major shift, given that for most of 2022, emerging stock markets have been penalized by the strength of the US currency, which has become the haven of choice for investors and has also made financing more expensive for developing markets.

Added to this is the reopening of China, which eases the economy and allows the potential global recession to be less severe. In November, the MSCI China Index rose 29%, its highest monthly return since 2009.

“Inflationary pressures are easing, which is helping emerging central banks ease their tightening cycles, while others such as China, Russia and Turkey continue to contemplate further monetary easing,” explains Generali. Insurance company experts point out that many investment firms seeking to offer attractive returns to their clients put emerging markets in their preferences.

Edmond de Rothschild AM notes that interest rates will continue to rise for longer than initially expected in the dollar zone and in the eurozone and corporate margins may be affected, so he prefers emerging stocks.

China is a great benchmark for Ferated Hermes, which shows that the economy of the Asian giant is undergoing a deeper, “exciting” transformation and presents “unique investment opportunities” for long-term investors. It highlights six positioning topics: digitization, technology, biotechnology, savings financing, metaverse, and the location of critical technologies.

BlackRock estimates China’s growth to be 6% this year, but it doesn’t expect the economy to return to pre-crisis levels. However, he calculates that reopening after the zero Covid policy and its domestic consumption will boost global growth when the recession materializes in developed markets. For this reason, he prefers “emerging market stocks over developed stocks”.

The outlook is also positive for debt originating. “It paints a positive picture, especially for countries with abundant raw materials, such as Brazil,” says Jupiter AM. Pictet AM favors both emerging stocks and bonds, especially Latin American debt: “Latin America tends to be the main beneficiary of a weaker dollar, and so we focus on the largest markets, especially Brazil and Mexico.”