(Bloomberg) — Emerging market stocks rose on Tuesday, with the leading stock gauge giving a final boost for the year thanks to an Asian tech rally and signs that China is preparing to roll out more stimulus.
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MSCI’s benchmark emerging markets equity index rose for a second day in a thin pre-holiday session, boosted by a 1% gain in Chinese stocks. While it’s on track for a total return of around 9%, it still significantly underperforms developed market stocks, which have returned more than 20% so far this year.
The MSCI indicator for emerging currencies fell for the second session. The index is hovering at the lowest level since August and is headed for a 0.5% loss this year. Meanwhile, emerging market dollar sovereign and corporate bonds have returned around 7% in 2024, according to a Bloomberg index.
A series of headwinds loom for developing nations, including threats of tariff increases from President-elect Donald Trump, geopolitical tensions and signs of persistent inflation. However, some investors remain optimistic.
The year “2025 will bring volatility again, especially when Trump officially comes to power, but emerging market companies have very solid fundamentals that will help them navigate this uncertain environment,” said Arnaud Boué, senior fixed income portfolio manager. from Bank Julius Baer in Zurich. “Net leverage is very low for investment grade companies, but also for high yield companies and expectations of default are also very low.”
In a positive for markets, Chinese markets got a boost from a Reuters report that authorities plan to sell a record three trillion yuan ($411 billion) in special Treasury bonds in 2025 to fuel the slowdown. the economy. Chinese stocks rose, taking this year’s gains to more than 16%.
Asian technology stocks also extended their recent rally, with Taiwan Semiconductor Manufacturing Co. hitting an all-time high, putting the world’s largest contract chipmaker on track for its best annual stock performance in 25 years. The stock rose as much as 1.4% on Tuesday, before erasing the gain to finish flat. Shares of Alibaba Group Holding Ltd. also rose 2.7%.
The Colombian peso rose 1% as the best-performing currency among developing currencies, while the South African rand lagged noticeably with a fall of 0.6%. The South Korean won was undermined by weak consumer confidence data as well as the opposition party’s pledge to open impeachment proceedings against interim president Han Duck-soo.