Emerging-market stocks showed strength on Tuesday amid Asian tech rally and speculation about fresh Chinese stimulus lifted investor sentiment. MSCI’s benchmark index for emerging-market equities climbed for a second consecutive day, with Chinese stocks leading the charge in a holiday-thinned trading environment.
Despite the day’s gains, emerging-market equities have lagged behind their developed-market counterparts in 2024. While the MSCI EM index has posted a respectable 9% total return for the year, it pales in comparison to the over 20% return from developed markets.
Emerging currencies have also struggled, with MSCI’s currency gauge dipping for a second session, leaving it on track for a 0.5% annual decline. On a more positive note, sovereign and corporate dollar bonds from emerging markets have delivered a 7% return this year, according to Bloomberg data.
Chinese stocks rose by 1%, bolstered by reports that policymakers plan to issue a record three trillion yuan ($411 billion) in special treasury bonds in 2025 to address economic headwinds. This stimulus plan, if implemented, could inject much-needed momentum into the region’s largest economy, which has been grappling with slowing growth.
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Asian tech shares added to the upbeat sentiment, with Taiwan Semiconductor Manufacturing Co. (TSMC) achieving a record high before closing flat. TSMC’s strong performance positions it for its best annual gain in 25 years. Meanwhile, Alibaba Group Holding Ltd. surged 2.7%, contributing to a broader tech rally across the region.
Emerging-market currencies painted a mixed picture on Tuesday. The Colombian peso led the pack with a 1% gain, while the South African rand slid 0.6%, weighed down by political uncertainty and weaker consumer confidence.
The South Korean won also struggled, impacted by soft economic data and political tensions, as opposition lawmakers pledged to initiate impeachment proceedings against Acting President Han Duck-soo.
Brazil’s real remained stable after the central bank announced plans to auction up to $3 billion in the spot market, an effort to support the currency.
Meanwhile, Turkey’s lira edged up 0.1%, buoyed by the government’s decision to raise the minimum wage by 30% for 2025—a signal of ongoing shifts toward market-friendly policies under President Erdogan’s new economic team.