Asia and emerging markets review – where do we stand heading towards 2025?

Emerging market headlines continue to be dominated by the ongoing conflict in the Middle East, with both Lebanon and Iran now involved.

But any fears that a wider crisis in the region would impact oil prices hasn’t materialised so far.

In September, a wide-ranging series of measures were announced by China’s central bank with the aim of stimulating the economy back towards its goal of 5% annual GDP growth.

A brief market rally followed, but some of these gains have since been handed back.

However, perhaps one of the biggest focuses for emerging market investors over the last few months has been India’s growth story.

India growing on all fronts

Some think that India’s rapid economic growth could be starting to cool slightly, but it’s still far from grinding to a halt.

Gross domestic product (GDP) was 6.7% higher at the end of June than a year before, a period that culminated in a mammoth six-week election process.

A significant amount of this growth is being driven by domestic consumption, particularly in rural areas that are becoming more urbanised.

Inflation in India has remained steady over the past year, but it reached a 12-month high of 6.21% in October 2024. This figure is often pushed by volatile food prices and food inflation also rose from the previous month to 10.87%.

The good 2024 monsoon season brings optimism for agricultural output which could see these figures move back towards target levels.

It was expected that by 2023, India would have overtaken China as the world’s most heavily populated country. Not only is it home to over 1.4 billion people, but the average age, while increasing, is still only 28 years.

This points to a young workforce, eager to further themselves. Compare that to 40 in the UK and 38 in the US.

China, the other superpower of emerging economies, is even starting to see a small population decline. Its median age is now not that much different to most fully-developed nations.

It’s estimated that by 2030, the population of India in the ‘consumer class’ (those able to buy goods and services beyond their basic needs) will more than double to 175 million households. This is a significant volume of spenders ready to fuel further expansion of the domestic economy.

This could present plenty of exciting investment opportunities. Although be aware that the Indian stock market has performed well recently, and shares are currently priced higher on average than many other markets.

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.

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How have stock markets fared?

The twelve months to the end of October 2024 were largely positive across Asia and emerging markets .

The MSCI Emerging Markets index rose 18.87%* over the year while MSCI AC Asia Pacific ex Japan finished 21.46% higher.

India maintained its position as one of the stronger emerging markets with the MSCI India benchmark rising 26.51%, although returns have been flatter since the general election result in June.

October saw the largest monthly drop in MSCI India since January 2023. Foreign investors exited the market as they chased the prospect of returns in a newly-stimulated China.

The stimulus package in China had a positive effect, with the MSCI China index finishing October 15.15% above its mark one year before – all gains coming in the final two months.

Attractively priced ‘value’ stocks, largely in financials and consumer discretionary sectors, outperformed their tech-heavy ‘growth’ counterparts by over 10% in the period.

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As impressive annual returns as these might be, Asian markets didn’t keep up with the broader global market. The MSCI AC World grew 25.91% over the year to October 2024, fuelled by the ongoing AI-related success of technology stocks in the US.

Growth in emerging Europe was more muted, with MSCI Emerging Markets Europe rising 8.86%.

Turkey, the second largest component of this index, fell over the summer, driven by its proximity to escalating conflict in the Middle East and persisting inflationary troubles. Interest rates currently sit at 50% as Turkey’s central bank tries to wrestle inflation down from 2022 highs of over 80%.

Latin American markets were weakest. Shares across the region fell 2.82% with high interest rates in Brazil weighing heavily.

If you’re looking 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 is normally riskier 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.

This is to be expected as the different styles adopted by fund managers, as well as their areas of focus, will have different levels of success depending on economic conditions.

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.

Both the Jupiter India and FSSA Greater China Growth funds invest in emerging markets and smaller companies, which increases risk.

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