Emerging Markets: The Tide Is Turning
It looks like the tide is turning in the Chinese stock market. The government’s efforts to boost the economy as well as the stock market are having a substantial impact. Lower interest rates, loosened mortgage conditions, easier bank lending and a multitude of other efforts are designed to help the economy and particularly consumer spending.
At the end of the day, China makes up about 30% of the benchmark emerging markets index. Whether that weighting still makes sense is another debate entirely, but its influence is undeniable.
Thanks to this index, when capital flows into China, the entire EM universe benefits. Many investors tend to lump all emerging markets together or even equate EM investing with investing in China.
Now, with China rolling out significant economic stimulus to bolster its economy, the outlook for emerging markets is bright. Previously, the Chinese government was hesitant to deploy large-scale stimulus measures. But that stance has changed, and they’ve now pivoted to policies aimed at recovery and growth. Particularly encouraging is the government’s renewed commitment to strengthening the private sector.
Bloomberg TV’s Joumanna Bercetche asked me if I believe this is China’s “whatever it takes” moment to save its economy. To me, it certainly seems that way. The government's urgency is clear, as you can see the frequency of press briefings in recent days. They’re making it known that they’re serious about turning things around. Hopefully, this isn’t just rhetoric — actions must follow. That said, the shift in sentiment is palpable and many are convinced. While there continues to be volatility in the Chinese stock markets, I believe the trajectory is promising.
During my recent interview with Fox Business’s Liz Claman, I was asked whether China’s capital control issues should be a concern, especially given my banking challenges last year. To clarify, I never said I was “done with” China, as someone on X suggested. In fact, let me just put this to bed once and for all: I will never be “done with” China. Ideally, the removal of capital controls would be fantastic, but for those worried, Hong Kong’s stock market remains an excellent gateway to China.
In short, Beijing’s latest stimulus measures are likely to lift not just China but the broader EM space, potentially diverting investment away from U.S. markets as investors seek better growth opportunities.
China’s recovery is poised to be a major force driving EM performance, potentially marking the start of a new era for emerging markets as global investors hunt for fresh growth stories.
Here are my latest TV interviews on China:
CNBC: https://bit.ly/4f7S61v
Bloomberg: https://bit.ly/401f6ep
Fox Business: https://bit.ly/3BOu0uk