Veteran investor Mark Mobius and Goldman Sachs strategists say China weighs heavily in the index, and its close economic ties with other developing countries mean that emerging-market stocks are undervalued. It is expected to be boosted by economic stimulus measures.
China accounts for a quarter of the benchmark MSCI Emerging Markets Index, meaning that when the Chinese market rises, so does the index. Emerging market stocks have risen 10% from their mid-September lows, thanks to economic stimulus and Federal Reserve interest rate cuts.
Goldman strategists, including Kamaksha Trivedi, said in a note that China’s monetary easing has widened the rally in emerging market stocks, driven by a large rally in heavily weighted Chinese stocks. said. They are up nearly 40% from their lows, making China’s outperformance relative to other emerging markets over the past three weeks the largest in 25 years.
They said they expect China’s growth to spread to several countries including South Korea, Malaysia and South Africa, pushing emerging market stocks further higher.
Goldman Sachs has made China overweight in its Asia strategy.
Bank of America, citing data from EPFR Global, said weekly inflows into emerging market equity funds hit a record $41 billion through Oct. 9. Inflows into Chinese stocks reached a record $39.1 billion during the week.
