The global investment scene is focusing on emerging markets again. These areas showed strength last year, with the MSCI EM Index going up 5.0% in the second quarter. They have seen a 7.5% return so far this year.
This growth is thanks to election surprises, AI trends, and a strong US dollar. It shows how promising these markets are for investors.
Key Takeaways
- Emerging markets equities gained 5% in the quarter, with surprise election results, AI optimism, and a resilient US dollar.
- The MSCI EM Index had a 5.0% gain in the second quarter, resulting in year-to-date returns of 7.5%.
- Information technology, communication services, utilities, and consumer discretionary sectors led the way in emerging markets equities.
- Asia outperformed all regions, led by Turkey, Taiwan, South Africa, India, Hungary, and China.
- Economic growth in emerging markets is projected to be 4.2% in 2024, while developed markets are expected to grow at 1.5%.
Looking to 2024, we see many positive factors for emerging markets. These include faster growth, better corporate earnings, easier global monetary policy, and lower valuations. Also, emerging markets debt looks like a great opportunity. This is because of monetary policy, economic growth, fiscal policy, and valuations.
We will now dive into the top emerging markets to watch in 2024. We’ll look at their unique investment cases and what makes them stand out for investors looking for high growth.
Emerging Markets Overview
Investors might want to rethink their emerging market (EM) investments. EM countries cover over 75% of the world’s land and have almost 90% of its people. They also drive 80% of global GDP growth, but make up just 11.7% of the market. This could be the perfect time to look at EM again, with many opportunities in different areas.
Key Opportunities: Cyclical, Structural, Contrarian, and Value
Brazil is a great example of a cyclical opportunity, as its economy is set to bounce back. India is another chance, thanks to its growing market and focus on better infrastructure. China offers a contrarian play, as it deals with economic hurdles. And Greece is a value opportunity, as it recovers from past challenges.
Keys to Potential EM Outperformance: Growth and the U.S. Dollar
Two main factors could boost EM in 2024: their growth and the U.S. dollar’s impact. EM economies are likely to grow faster than developed markets, making the EM growth premium more attractive. Also, the U.S. dollar is high against many currencies, which could help EM if the dollar drops.
| Metric | 2016 | 2024 (Projected) |
|---|---|---|
| EM Growth Premium | Declining | Expanding |
| EM Sovereign Rating Changes (Upgrades) | 10% | 80% |
| EM Stocks Discount to S&P 500 | 33% | 44% |
| EM Local Currency Real Rates | – | 50bps Higher |
| Foreign Investor Ownership of EM Local Bonds (Excl. China) | 17.5% | 12.5% |
« EM countries represent over 75% of global land, almost 90% of the population, and 80% of global GDP growth, but only 11.7% of global market cap. »
China
The Chinese market could be a good chance for smart investors in 2024. Valuations are not matching up with the economy yet. There are several good signs, like steady government stimulus, better China-US geopolitics, and signs of more external demand. The property sector is also stabilizing.
China’s economy grew by 5.3% in the first quarter of 2024, beating forecasts. The Central Economic Work Conference set out key goals. These include boosting innovation, increasing domestic demand, and reducing risks in key areas. This shows the government is backing the economy and trying to increase consumer confidence.
China saw its first drop in exports last year, with a 4.6% fall. But, exports jumped by 7.6% over the year ending in May 2024. This hints at a comeback in China’s manufacturing and trade sector. This could help lift the market.
The property sector in China, a big worry, is calming down. Property investment dropped by 10.1% year-over-year from January to May 2024. New home prices have fallen for 11 straight months, hinting at a market correction.
With these positive signs, the China market outlook looks better for 2024. It could be a good time for investors to look into China’s valuations and growth potential.
« The key to unlocking value in China’s markets lies in identifying companies that can thrive amidst the dynamic shifts in the economic landscape. »
India
India is a top pick for growth in emerging markets. It has the biggest general and youth populations, a skilled workforce, and a government that supports the market. But, Prime Minister Narendra Modi’s weaker election results might make him work more with others. This could lead to concerns about spending and the government supporting political groups.
Modi 3.0
Despite the hurdles, the outlook for India’s market is still strong. The NSE Nifty 50 and S&P BSE Sensex indexes have risen by about 26% and 22% in the past year. Now, India accounts for around 19% of the MSCI Emerging Markets Index. The economy is expected to grow by 5-7%, and the budget deficit is at a five-year low.
Foreign investors have been buying Indian stocks for 12 straight days from June 10 to June 26. They put in about INR 32,087 cr, while Domestic Institutional Investors added INR 20,002 cr. Retail investors also bought stocks worth INR 21,179 cr on Election Day.
Different sectors have done well or poorly. The IT, Banking, and Pharmaceuticals sectors are doing well. But, the Metals and FMCG sectors are facing issues. The India VIX Index, which measures market volatility, has fallen to around 14 in July. This shows the market is stabilizing.
As India moves forward under its new political scene, investors will keep an eye on the government’s policies. These policies will affect India’s economic growth and how the market performs.
South Korea
South Korea’s equity market is special. It’s seen as a developed market by FTSE but also as part of emerging markets by MSCI. This dual classification is key for investors looking to mix developed and emerging market gains.
The tech sector in South Korea keeps driving its economy. In March, the country’s exports to China went up by 0.4%. Exports to the U.S. and Latin America jumped by almost 12% and 14%, respectively. Semiconductor exports saw a big 22% increase in December, thanks to high demand for new tech.
Foreign investors see South Korea as strong, with $11.7 billion in net foreign buying in the first quarter of 2024. The job market is getting better, with unemployment at 2.6%. This is better than the 10-year average of 3.5%.
South Korea looks good for 2024, with a GDP growth forecast of 2.2%. The global GDP is expected to grow by 2.5%. Strong demand and lower inflation are good signs for its economy.
| ETF | Gross Expense Ratio |
|---|---|
| WisdomTree Emerging Markets ex-China Fund (XC) | 0.32% |
| WisdomTree Emerging Markets Multifactor Fund (EMMF) | 0.48% |
| WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE) | 0.32% |
| WisdomTree Emerging Markets Quality Dividend Growth Fund (DGRE) | 0.32% |
| WisdomTree Emerging Markets Small Cap Dividend Fund (DGS) | 0.58% |
| WisdomTree Emerging Markets High Dividend Fund (DEM) | 0.63% |
| Vanguard Emerging Markets Stock Index Fund (VWO) | 0.08% |
| SPDR Portfolio Emerging Markets ETF (SPEM) | 0.07% |
| Schwab Emerging Markets Equity ETF (SCHE) | 0.110% |
| DFA Dimensional Emerging Markets Core Equity 2 ETF (FNDE) | 0.390% |
| iShares ESG Aware MSCI Emerging Markets ETF (ESGE) | 0.25% |
Investors looking at global markets should note South Korea’s special spot. It’s a developed market in the emerging market group. By understanding its economy and using smart investment strategies, investors can tap into its growth potential.
Taiwan
In the first half of 2024, Taiwan’s market shone brightly among emerging markets. It saw a big jump in tech sector optimism and a strong rise in orders. This led to a 28% increase in its stock market. Taiwan outshone the Nikkei 225 index in Japan, which rose by about 18% during the same time.
The Taiwan market’s success comes from its tech companies doing well. Taiwan Semiconductor Manufacturing Corp (TSMC), a top name in semiconductors, saw a 63% increase in the first half. Foxconn, famous for making electronics, jumped by 105% in the same period.
This Taiwan tech sector optimism boosts the country’s economic outlook. Technology is key to Taiwan’s economy. The success of these tech giants makes the Taiwan market stand out in the region.
| Market | Performance in First Half of 2024 |
|---|---|
| Taiwan | +28% |
| Japan (Nikkei 225) | +18% |
| Thailand (SET Index) | -8% |
| Indonesia (Jakarta Composite) | -2.88% |
| Philippines (PSE Index) | -0.6% |
The Taiwan economy shows resilience and optimism. It’s a promising market for investors looking at emerging markets.
The Association of Southeast Asian Nations (ASEAN)
ASEAN is a hot spot for investment, thanks to its young, growing people and rising middle class. This creates strong demand in sectors like manufacturing and e-commerce. Its strategic location and growing free trade deals also make it a top choice for companies looking to spread out their supply chains.
ASEAN is set to grow fast in 2024, becoming the world’s fastest-growing region in the next decade. This growth is thanks to good demographics, better infrastructure, and more foreign investment. As prices drop, people will spend more, making ASEAN’s markets even more attractive.
The partnership between ASEAN and Australia is getting stronger, with a big summit in 2024. This summit aims to boost cooperation in trade, investment, leadership, clean energy, and maritime issues. These areas highlight the huge potential and benefits of working together in ASEAN.
| Key ASEAN Economic Indicators | 2023 (Estimate) | 2024 (Forecast) |
|---|---|---|
| GDP Growth | 4.8% | 5.2% |
| Inflation | 3.5% | 2.9% |
| Unemployment Rate | 5.1% | 4.9% |
| FDI Inflows | $145 billion | $160 billion |
| Trade Balance | $85 billion | $92 billion |
ASEAN’s strong economy, vibrant markets, and manufacturing skills make it a top choice for investors. With its strategic partnerships and business-friendly policies, ASEAN is set to become a global economic leader.
Brazil
In 2024, Brazil is a key player in the emerging markets. After a period of tightening, the Brazilian central bank plans to cut interest rates. This move often boosts the equity market.
Historically, when Brazil cuts rates, its equity market goes up by about 97% on average. This trend hints at a strong recovery as the central bank eases monetary policy. The Brazil market could see a big bounce back.
The Brazil central bank has fought hard against inflation. Now, with inflation expected to stabilize in 2024, it might turn its focus to other areas. Investors will keep an eye on Brazil interest rates and their effect on Brazil equity performance.
| Indicator | 2023 | 2024 (Forecast) |
|---|---|---|
| GDP Growth | 1.9% | 2.5% |
| Inflation Rate | 5.2% | 4.8% |
| Key Interest Rate | 13.75% | 11.5% |
| Equity Market Performance | 5.2% | 15.3% |
Brazil’s economy is strong, thanks to its varied sectors like agriculture, manufacturing, and technology. With investments in infrastructure and tax reforms, Brazil is ready to benefit from global economic changes.
« Brazil’s economic outlook is cautiously optimistic, with the potential for a cyclical upturn in the coming year as the central bank pivots towards easing. »
Mexico
The 2024 elections in Mexico are bringing big changes to the political scene. Claudia Sheinbaum, running for the Morena party, is leading. This has made people worry about how it might affect Mexico’s courts and how investors will feel.
If Sheinbaum wins, the Morena party will have a strong majority. This could lead to big changes. But, the new team is trying to ease worries by choosing friendly faces for the cabinet. They’re focusing on helping businesses grow and bringing in more foreign money.
Sheinbaum and the Morena Agenda
At first, people were worried about Sheinbaum’s plans. But now, it seems she’s going for a smart way to fix the economy. She’s looking into clean energy and bringing jobs closer to home. This could use Mexico’s strong spot in the world and its growing skills in making things.
Experts think Mexico’s economy will grow by 2.2% in 2024. They predict steady growth of 2.1% from 2025 to 2030. This is good news after a tough time during the pandemic, when the economy shrank but then bounced back with a 3.2% growth in 2023.
| Metric | Value |
|---|---|
| Mexico GDP Growth (2024 estimate) | 2.2% |
| Mexico GDP Growth (2025-2030 average) | 2.1% |
| Mexico GDP Growth (2023) | 3.2% |
| Mexico Public Debt (2024 estimate) | 50% of GDP |
| Mexico Inflation Rate (2024 estimate) | 4.3% |
There are still worries about the courts, but the Morena party’s plans could help Mexico grow. They’re focusing on clean energy and bringing jobs closer to home. This could make the market stronger and boost investor confidence.
Andean Region
The Andean region includes countries like Colombia, Peru, and Chile. It offers great investment chances, especially in commodities. But, it also has political and economic ups and downs that investors need to watch out for.
Peru is a big part of the Andean economy. It has one of the lowest inflation rates around. The country ranks 76th in the World Bank Group’s list and has 29 free trade agreements. Peru gets a lot of foreign investment and its young entrepreneurs show a strong business spirit.
But, Peru’s economy has hit some bumps lately. Its GDP fell by 0.6 percent in 2023, a big drop from the year before. The country’s budget deficit also grew, from 1.6 percent of GDP to 2.8 percent in 2023.
| Country | M&A Transactions (2023) | Total Transaction Value (USD billions) |
|---|---|---|
| Brazil | 1,075 | $25.234 |
| Chile | 223 | $48.995 |
| Mexico | 203 | $10.639 |
| Colombia | 134 | $2.572 |
| Argentina | 120 | $1.565 |
| Peru | 70 | $3.857 |
Even with its challenges, Peru is still a good place for investors. It has a lot of money set aside internationally and its inflation is expected to go down. The Andean region is also seeing more demand for its commodities, making it an interesting spot for investors who can handle its ups and downs.
Investors should keep an eye on the political and economic stability in the Andean region. Knowing the Andean economies, their investment chances, and the risks can help investors make smart moves in this changing and varied region.
Emerging Europe
In the Emerging Europe region, South Africa has caught a lot of attention lately. Under President Cyril Ramaphosa, the country is dealing with a complex political scene. The African National Congress (ANC) didn’t win enough votes in the latest election. This led to a coalition government being formed.
The coalition deal between the ANC and its allies focuses on economic reforms. This could help South Africa build a stable democracy and a more inclusive economy. But, it’s important to watch for any disagreements among the coalition as they work on their plans.
One big challenge for South Africa is fixing the electricity supply. The country has had ongoing power cuts that hurt its economic growth and competitiveness. The new government says it will work on this, but we’ll see how successful they are.
| Emerging Europe Market Outlook | 2023 | 2024 | 2025 |
|---|---|---|---|
| EU GDP Growth | 1.0% | 1.6% | 1.6% |
| EU Inflation (HICP) | 6.4% | 2.7% | 2.2% |
| EU Employment Growth | 1.5% | N/A | N/A |
The Emerging Europe markets are changing, and South Africa’s progress is being watched by many. How well the coalition government handles the country’s economic and political issues will be key. This will affect South Africa’s future.
« The coalition agreement between the ANC and its partners has a strong focus on economic reforms, presenting South Africa with a chance to create a more stable democracy and an inclusive economy. »
Middle East and North Africa (MENA)
The Middle East and North Africa (MENA) region is complex, with both chances and hurdles for investors. The World Bank says the region’s economy will grow by 2.7% in 2024, up from 1.9% the year before. But, growth varies across the region, with the Gulf Cooperation Council (GCC) expected to grow faster than other areas.
The gap in growth rates between the GCC and other oil importers is getting smaller. In 2022, the GCC grew 5.6 percentage points faster. By 2024, this gap will shrink. Yet, the MENA region’s average income per person is only expected to increase by 1.3%.
Geopolitical tensions and economic ups and downs are big hurdles in the MENA region. For example, Gaza’s economy was 86% lower in the last quarter of 2023 than in the same period the year before. Most MENA countries have seen their debt increase over the past decade. Oil importers are finding it hard to cut their debt due to rising prices and other issues.
To overcome these challenges, the MENA region needs better debt transparency and economic diversification. Experts suggest a detailed plan to tackle the region’s economic and political issues. This could unlock growth and open up new investment chances.
| Key Indicator | 2023 | 2024 (Forecast) |
|---|---|---|
| MENA Region Economic Growth | 1.9% | 2.7% |
| GCC Economies Growth | N/A | 0.9 percentage points higher than developing oil importers |
| MENA Region GDP per Capita Growth | N/A | 1.3% |
| Gaza Strip GDP (Q4 2023 vs Q4 2022) | -86% | N/A |
« To unlock the true potential of the MENA region, a comprehensive strategy is needed to address the unique economic and geopolitical dynamics, fostering greater debt transparency and economic diversification. »
emerging markets to watch in 2024
The global economy is moving forward after the pandemic. A few top emerging markets stand out as great places to invest in 2024. They have good prices, strong growth chances, and things that could make them even better.
Experts at The Conference Board say the world’s growth is getting back on track. This is good news for emerging consumer markets. Some of the best ones to watch are:
- China, with its huge number of consumers and ongoing economic changes
- India, led by the Modi 3.0 plan and growing population
- Brazil, offering a chance to invest as it gets better
- Mexico, helped by the Morena plan and working together with neighbors
- The ASEAN region, which has many chances for growth
These promising emerging markets have shown they can bounce back from tough times. They’re growing because of things like young people, cities getting bigger, and more people spending money. Investors looking at these top emerging markets to watch in 2024 need to know the market well and have smart strategies.
| Emerging Market | Key Drivers | Potential Catalysts |
|---|---|---|
| China | Vast consumer base, economic reforms | Continued urbanization, technology innovation |
| India | Demographic dividend, Modi 3.0 agenda | Infrastructure investment, manufacturing growth |
| Brazil | Cyclical recovery, commodity strength | Fiscal and political reforms, rising middle class |
| Mexico | Morena agenda, regional integration | Manufacturing hub, consumer market expansion |
| ASEAN | Diverse growth opportunities | Infrastructure development, digital transformation |
As the world changes, these top emerging markets to watch in 2024 are great chances for investors. By keeping an eye on these emerging consumer markets and what makes them tick, smart investors can find big opportunities.
« The post-pandemic landscape has created a compelling environment for investors to explore promising emerging markets with strong fundamentals and growth potential. »
Conclusion
The outlook for emerging markets in 2024 looks bright, with a chance for them to outperform. Investors should think about adding more to emerging markets. This asset class has good prices, can grow more, and spreads out risk better than developed markets. Since China’s stock market hit a low in January 2024, the MSCI Emerging Markets Index has gone up about 10% in U.S. dollars. This is more than the 9% rise for the MSCI World Index.
Emerging markets have their own risks and hurdles, but they look strong overall. They make up over half of the world’s GDP and nearly 80% of global market value. With emerging markets priced 50% lower on a price-to-book basis than developed markets, the biggest gap in 25 years, and growth in places like China and India, there’s a big chance for investors to make money in 2024.
By investing in emerging markets, investors can tap into its growth potential and reduce risks with a more balanced portfolio. As the world economy changes, emerging markets will play a bigger role. This makes them a key investment for those looking to benefit from the world’s shifting economy.