China’s recent crackdowns on short-selling and program trading have lifted emerging market equities, driving an index tracking these stocks to a two-year high.
The MSCI index, which tracks stocks in developing economies, increased by over 1%, alongside a similar rise in China’s main indexes. This followed the Chinese securities regulator announcing restrictions on short-selling and tighter scrutiny of algorithmic trading. With equity indexes near pandemic lows and bond yields at record lows, there’s heightened anticipation ahead of the once-in-five-year Communist Party meeting, where traders expect measures to boost growth and confidence in China’s economy. Despite a slow macroeconomic recovery, investment opportunities are ripe in large, globally exposed corporations and mid-to-small-cap companies in China.
Meanwhile, other emerging economies faced mixed performance. Kenya’s shilling dropped against the euro, and the Czech crown hovered near a three-month low. India saw a minor dip in the rupee, yet expanded the use of foreign currency accounts at GIFT City to enhance business prospects. Notably, Uganda’s shilling rose as its central bank began buying local gold to bolster reserves. All eyes now turn to the upcoming US inflation report and central bank decisions in several other countries.
The recent policies by China have invigorated developing market equities, causing the MSCI index to reach a two-year high. Investors in emerging markets should monitor these developments closely, as further regulatory changes in China and anticipated central bank decisions across various countries could continue to influence market dynamics.
China’s regulatory crackdowns and the forthcoming Communist Party meeting highlight the strategic shifts impacting global economies. While regions like Kenya face fiscal challenges under IMF-led policies, reforms promise more sustainable futures. Similarly, changes in monetary policies in the Czech Republic and Uganda’s strategic gold purchases reflect broader economic recalibrations that could shape long-term investment landscapes worldwide.
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.
