(Bloomberg) — Emerging market shares rose Tuesday, with the main stock index pushing to end the year with a near double-digit return on the back of an Asian technology rally and signs that China is preparing to unleash more stimulus.
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MSCI’s benchmark EM stock index rose for a second day in thin pre-holiday trading, after returning 8.9% overall this year. The gain was driven by a 1% rise in Chinese shares. Yet the index is significantly underperforming developed market stocks, which have returned more than 20% so far this year.
The MSCI emerging market currency index moved lower, falling for a second session. The index hovered around the lowest level since August and is heading for a loss of 0.5% this year. Meanwhile, emerging market government and corporate dollar bonds have a return of around 7% in 2024, according to a Bloomberg index.
A number of headwinds loom for developing countries, including the threat of tariff increases by newly elected President Donald Trump, geopolitical tensions and signs of continued inflation. However, some investors remain optimistic.
The year “2025 will bring renewed volatility, especially when Trump officially comes to power, but emerging market companies have very sound fundamentals that will help them navigate this uncertain environment,” said Arnaud Boué, senior fixed income portfolio manager values at Bank. Julius Baer in Zurich. “The net debt ratio is very low for investment grade, but also high yield companies and default expectations are also very low.”
On the plus side, Chinese markets got a boost from a Reuters report that policymakers plan to sell a record three trillion yuan ($411 billion) of special government bonds in 2025 to support the slowing economy. Chinese shares rose, bringing gains this year to more than 16%.
Asian technology stocks also continued their recent rally, with Taiwan Semiconductor Manufacturing Co. hit a record high, putting the world’s largest contract chipmaker on track for its best annual stock performance in 25 years. The stock climbed as much as 1.4% on Tuesday before erasing gains to finish flat. The shares in Alibaba Group Holding Ltd. also rose by 2.7%.
The Colombian peso rose 1% as the outperformer among emerging currencies, while the South Korean won was a notable laggard, down 0.5%. The victory was undermined by weak consumer confidence figures and by the opposition party’s promise to initiate impeachment proceedings against acting President Han Duck-soo.
Brazil’s real was little changed in thin trading after the country’s central bank announced Monday that it will auction up to $3 billion on the spot market on December 26 in a new attempt to prop up the currency.
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