Asia and emerging markets review – plus what’s next for China in 2025?

Most investors are watching what new US President Donald Trump will do next, and for those in emerging markets it’s no different.

The threats of tariffs from the US have dominated headlines, with investors battling to gauge the effects these will have on global trade if or when they arrive.

However, there have been plenty of market-moving events closer to home too.

In December, South Korea was briefly plunged into chaos when President Yoon unsuccessfully declared martial law in an attempt to force a budget through parliament. The stock market and the South Korean currency (the Won) both fell sharply in the immediate aftermath.

India’s latest budget focused on tax cuts for the middle class with the goal of increasing domestic consumption.

The Reserve Bank of India also cut interest rates for the first time in nearly five years. Both measures were aimed at boosting the economy, which has seen growth slow more recently.

This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice. All investments and any income from them can fall as well as rise in value, so you could get back less than you invest. Past performance also isn’t a guide to the future.

Can China continue to grow?

In the final months of 2024, the Chinese government announced a range of measures to stimulate the economy. This included support for the crisis-hit property market and debt relief for local governments.

The effects were positive as year-on-year gross domestic product (GDP) growth for the fourth quarter was 5.4% – above the 5% target set by China’s government.

But there are still worries the country could be heading towards deflation as consumer demand remains low.

China exports over $3tn of goods each year. This is more than it imports, meaning the country has a trade surplus. Growth in exports in 2024 was a key reason for the growth of the economy.

In his first term in office, Donald Trump started a trade war with China when he implemented tariffs on some Chinese goods.

During his presidential campaign last year, he threatened to increase tariffs to 60% across all goods and services that the US imports from China. While that hasn’t happened, in February he hit imports from China with an additional 10% tariff above existing US tariffs.

In 2024, China exported over $400bn worth of goods and services to the US, more than to any other country. Tariffs would normally cause this number to fall, as US companies look to buy from other countries, or domestically, to avoid paying the tariff.

China might well look to some of their other large trading partners, like Japan, South Korea and Vietnam, to pick up the slack. Continued growth of China’s economy could depend on it.

How have Asian stock markets performed?

Asia and emerging markets saw positive gains over the twelve months to January 2025.

The MSCI Emerging Markets index rose 18.22%* over the year, while MSCI AC Asia Pacific ex Japan finished 20.73% higher.

China was the strongest performer, with MSCI China rising 38.52%, driven by announcements of economic stimulus from the government.

IT Services was the standout sector, growing 97.40%. Financial companies also performed strongly, finishing 53.85% higher.

India continued to grow but a strong 2024 was dampened by a sharp drop to start this year. MSCI India was 8.51% higher at the end of January 2025 compared to a year before.

Foreign investors have withdrawn from the market recently on fears that companies have become too expensive.

Latin American markets were weakest. Shares across the region fell 12.78%. Sustained high interest rates in Brazil led MSCI Brazil to fall 13.64% and MSCI Mexico fell 20.73% as Trump’s second term in office came into view.

If you’re seeking to invest in emerging markets, a fund that offers wide exposure to Asia or a global emerging markets fund could be a good option. Be aware though that investing in these areas typically comes with higher levels of risk than more established markets.

How have Wealth Shortlist funds performed?

All Asia and emerging markets funds on the Wealth Shortlist have delivered positive returns over the past 12 months, although results have varied.

We expect this as fund managers have different investment styles and areas of focus. These will have varying levels of success depending on economic conditions. As always, past performance isn’t a guide to the future.

Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a long-term diversified portfolio.

For more details on each fund and its risks including charges, see the links to their factsheets and key investor information below.