Emerging Markets better in 2024

LESS BAD: Emerging markets (EM) dominate the world economy, its growth, and population. Yet been perennial stock market underperformers, with their $6 trillion market cap. representing just 11% the global total. They’re a poster child for stock markets not being economies. China’s market dominates, at 30% of EM stocks. Its economy has grown 13-fold in 25 years but its stock market (MCHI) only 70% (see chart). 2023 has been another EM underperformance year. 2024 should be better. With China’ economy stabilizing, global interest rates falling, US dollar easing. With EM stocks this unloved and cheap, a little less-bad news could go a long way. Recent Middle East additions to EM have shown big IPO issuance, as asset class keeps broadening.

ASIA: The region makes up 75% the EM stocks asset class, anchored by China. The country is an attractive contrarian call for the brave With the economy stabilizing and GDP forecasts rising, as it combats triple headwinds of struggling consumer, property, and export manufacturing sectors. Valuations have derated to under 10x P/E, and investor sentiment very depressed after the market halved in three years. Though as seen with Alibaba’s (BABA) spin-off volte-face it can still disappoint. Elsewhere, the continued tech recovery and Jan. 13 election will drive Korea and Taiwan. Whilst India’s (INDA) world-leading GDP growth balanced by equal high valuations. 

MIDDLE EAST: The last decade saw UAE, Qatar, Saudi Arabia and Kuwait all added to the MSCI Emerging Markets index, with Argentina (ARGT), Pakistan, and Russia removed. These newcomers struggled recently, as oil prices  eased and interest rates rose, but their markets have developed enormously. With 29 IPO offerings raising $6bn this year, after 2022’s boom of 51. The MSCI GCC index is dominated by Saudi Arabia and banks, followed by the UAE and Materials. Saudi Aramco is publicly listed (SAOC), but the impact of oil on the world’s largest exporters is indirect, through economy not stock market, and with their currencies US-pegged.

All data, figures & charts are valid as of 20/11/2023.