EM Dynamics

Welcome to the first edition of EM Dynamics, your monthly insight into the forces behind Emerging Markets (EM) investments.

Higher-for-longer interest rates and slower growth in developed markets add to the appeal of EM investments. But geopolitical frictions and shifting supply chains are reshaping the EM landscape. What will drive the next phase of EM growth, and which markets and sectors will outperform?

Read on for insights and tools to navigate the vibrant but complex world of EM investing.

Balance DM uncertainty with EM diversity

Most EM equities trade at a discount to Developed Market (DM) counterparts. But over the long term, our research shows EM investments can enhance portfolio diversification while adding positive, risk-adjusted returns¹.

Gain exposure to high growth. The International Monetary Fund expects overall EM GDP growth to reach 4% in 2024, compared to just 1.4% for advanced economies. .

Seek resilience. Inflation and rising interest rates have dominated the DM investment landscape in 2023. EM investments offer access to alternative drivers of returns and wider diversification benefits. Comparing the MSCI World Investable Market Index (IMI) to the MSCI Emerging Markets IMI shows:.

Find out more. Why have asset managers, wealth managers and asset owners sought EM exposure for over 30 years, and what attracts them now? Take a tour of our interactive Emerging Markets brochure for more.

Enduring attraction, evolving trends

The EM investment universe today is very different from 1988, when MSCI first launched its EM index³. The case for investment is as strong as ever, but investors need to move with the times. What will the realignment of global supply chains mean for EM investments?

New drivers. Technology is an important tailwind for EM investments. In China, our research shows that small-cap stocks have consistently outperformed larger companies with greater weighting towards new economy trends, such as robotics, smart cities, and digitalization.

Diverging returns. Diversification is core to the EM opportunity, yet investors should still expect there to be winners and losers within the EM universe. How will shifting geopolitical dynamics and global supply chains impact EM investments? Which countries could benefit from the energy transition?

In this fast-changing world, the size and sophistication of EM economies are sure to create new opportunities for investors.