The article by Ian Smith and others “Wall Street stocks struggle after ‘America First’ bets backfire” (Report, March 7) highlights the pitfalls of following consensus and the recent outperformance of European assets.
However it is worth noting an equally significant — if not greater — development: namely that emerging market (EM) stocks have also been outperforming. Notably, Chinese stocks listed in Hong Kong (H shares) have risen 20 per cent year-to-date (YTD), surpassing Germany’s Dax at 15 per cent.
Three factors drive the surge in Chinese stocks. Since last September, monetary and fiscal stimulus, including a People’s Bank of China facility lending to non-financial corporations for stock buybacks, have bolstered returns. Native advances in large language models like DeepSeek have narrowed the gap between Chinese and US tech stocks. Lastly, this month’s fiscal announcements and President Xi Jinping’s engagement with business leaders underscore Beijing’s willingness to support private sector-led growth.
Beyond China, countries such as South Africa, South Korea, Mexico, Brazil, Turkey and the UAE have seen gains exceeding 5 per cent YTD. Of course, not all EM countries are thriving.
India and Argentina are undergoing healthy corrections after strong bull runs, while Indonesia and Thailand face idiosyncratic challenges.
Overall, the MSCI EM Index is up 5.3 per cent YTD, outperforming the MSCI World by 4.1 per cent and the S&P 500 by 6.9 per cent. This stands in sharp contrast with the mid-December Bank of America Global Fund Manager Survey that showed investors held the largest overweight to US in history.
The extreme positioning suggests this convergence has many more legs to run.
Gustavo Medeiros
Head of Research, Ashmore Group, London WC2, UK
