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(Bloomberg) — Emerging-market stocks rose Tuesday, with the main equity gauge giving its last push of the year on an Asian tech rally and signs that China is preparing to unleash more stimulus
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MSCI’s benchmark index of emerging stocks rose for a second day in light trade ahead of the holiday, boosted by a 1% advance in Chinese shares. While it is targeting a total return of around 9%, it has still significantly underperformed developed market stocks, which have returned more than 20% so far this year.
MSCI’s gauge of emerging currencies fell for a second session. The index hovered around its lowest level since August and is on course for a 0.5% loss this year. Meanwhile, dollar-denominated sovereign and corporate bonds in emerging markets have returned about 7% in 2024, according to a Bloomberg index.
There are a number of headwinds for developing countries, including threats of increased tariffs from President-elect Donald Trump, geopolitical tensions and signs of sticky inflation. However, some investors remain optimistic.
The year “2025 will bring volatility again, especially when Trump officially comes to power, but emerging companies have very strong fundamentals that will help them navigate this uncertain environment,” said Arnaud Boué, senior income portfolio manager fixed by the Bank. Julius Baer in Zurich. “Net leverage is very low for investment-grade companies, but also high-yield companies and default expectations are also very low.”
On a positive note for the markets, Chinese markets got a boost from a Reuters report that policymakers plan to sell a record three trillion yuan ($411 billion) in special Treasuries in 2025 to boost the slowdown in the economy Chinese stocks rose, with gains this year exceeding 16%.
Asian tech stocks also extended their recent rally, with Taiwan Semiconductor Manufacturing Co. which hit a record high, putting the world’s largest contract chipmaker on track for its best annual stock performance in 25 years. Shares rose as much as 1.4% on Tuesday, before erasing the gain to finish flat. The shares of Alibaba Group Holding Ltd. they also increased by 2.7%.
The Colombian peso rose 1% as the best performer among developing currencies, while the South African rand was a notable laggard with a 0.6% drop. The South Korean won was undermined by weak consumer confidence data, as well as the opposition party’s promise to open impeachment proceedings against acting President Han Duck-soo.
