Emerging markets saw a significant surge, marking their best month in nearly a year, largely influenced by stimulus efforts from China and a notable rate cut by the Federal Reserve. Emerging market stocks and currencies experienced substantial gains this month, as Chinese economic support and the Fed’s aggressive rate reduction boosted confidence. Specifically, China’s blue-chip CSI300 index rose by around 21%, while the Shanghai Composite increased by more than 17%, recording their best monthly performance in years. In Hong Kong, the Hang Seng index spiked over 8% in a single day, primarily due to gains in property stocks. These gains were further supported by stimulus measures, such as the People’s Bank of China encouraging banks to cut mortgage rates and the easing of home-buying restrictions in key cities. The MSCI Emerging Markets Index also increased nearly 7%, making it the best performance since November, with stocks and currencies showing signs of strength for their best quarters in years.
Momentum appears to be building in emerging markets, reflected by the growing fund flows into these assets. Equities attracted $9.9 billion, while bonds saw inflows of $1.3 billion for the week ending September 25. Latin American bonds, in particular, drew the largest amount, which highlights strong investor confidence in the region. Moreover, Sri Lanka’s sovereign dollar bonds rallied to reach levels last seen in July, pointing to a renewed interest in diverse emerging market investments.
The broader global economic landscape is shifting as evidenced by China’s support measures and the Federal Reserve’s substantial rate cut, which are both strengthening investor sentiment towards emerging markets. Investors are moving past recent declines in China’s factory and service sectors and instead are focusing on these stimulus efforts. Additionally, regional factors are influencing this dynamic market environment. For instance, Poland’s higher-than-expected inflation data and upcoming rate decisions in countries like Colombia, Jamaica, and others further shape the outlook for global markets.
Emerging markets have benefited from a combination of local stimulus in China and supportive moves by the Federal Reserve. These shifts in global economic policy are encouraging investor interest, which is becoming evident in the rising equity and bond inflows, as well as improved performance in several emerging economies. This momentum is helping to build a promising outlook for these markets despite ongoing economic uncertainties.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
