"Gustavo Medeiros of Ashmore Group endorses the uprising in developing economies, as shared with our site"
In the world of global economics, emerging markets are making a significant comeback. Gustavo Medeiros, a renowned economist, has been highlighting the growth and development in these markets.
China, for instance, is not just focusing on favouring particular industries but aims to bolster its entire private sector. The Chinese government has shown more willingness to support enterprise over the past year, with developments in technology, particularly AI, receiving considerable support to accelerate progress in areas where China is already leading.
Indonesia, under its new president Prabowo, has consolidated state-owned companies into a sovereign wealth fund. This move has caused some investor uncertainty, but China, Taiwan's chipmaking, and AI are still boosting emerging market growth.
India, on the other hand, faces a headwind due to tariffs imposed by President Donald Trump. However, the economy is relatively insulated from global trade due to its large consumer sector. In a notable move, Apple plans to make all iPhones sold in the US in India by 2030.
The MSCI EM index has gained more than 20% in US dollar terms this year, with Mexico and Vietnam, among other emerging markets, seeing their stock markets rally 40% this year. The weaker US dollar is a source of support for these emerging markets.
Economic policy has been more sensible over the past five years in emerging markets, with a focus on inflation control, avoiding quantitative easing, and fiscal restraint. This has led to profit growth in the MSCI EM index eclipsing that of the MSCI World index over the past four quarters. Earnings per share in the MSCI EM Index are expected to rise from $80 to $96 or so this year.
Structural improvements in developing economies, notably lower inflation, and a shift to pro-market policies post-pandemic, have helped bolster sentiment. Governments in developing and emerging countries such as Côte d'Ivoire have implemented significant structural reforms recently, leading to positive economic growth and increased market attractiveness, notably through improvements in agricultural trade and exports like cocoa.
However, not all is smooth sailing. India's pace of growth in capital expenditure has ebbed, and valuations have become overpriced, creating headwinds. The main reason countries get stuck in the middle-income trap is a failure to innovate, not adverse demographics or other factors.
In the chip sector, TSMC has the tightest grip due to its ability to produce cutting-edge chips economically. Tariffs on certain goods are between 10% and 30% in some emerging markets.
Despite these challenges, the banking sector in India is performing well, with reasonable valuations, strong growth, and an interest-rate curve steepening. America, with the world's reserve currency and the deepest capital markets in the world, continues to play a significant role in the global economy.
In conclusion, emerging markets are showing promising signs of growth and development. With sensible economic policies, support from governments, and a focus on innovation, these markets are poised for a bright future.
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