New market trends are emerging as investors turn their attention to investment opportunities in countries outside of China, particularly India and Taiwan. The economies and stock markets of both these countries are garnering attention and trust from global financial investors.
The MSCI Emerging Markets Index, excluding China, closed at 5,841 on December 8th, marking an 8% increase since the end of October. It only experienced a slight dip from the yearly peak reached in August.
India – Robust Momentum Driven by Domestic Demand
India, with the largest share in the index, has played a crucial role in the impressive growth of the MSCI index. Particularly, India’s Sensex index has set a new record, surpassing the $4 trillion market capitalization threshold. This demonstrates the strength of the Indian market and investor confidence.
Investors are banking on the increasing domestic demand in India, a country with the world’s largest population and on the path to becoming a global manufacturing hub. This market becomes more attractive as the world aims to diversify supply chains and reduce dependence on China.
Goldman Sachs upgraded its rating for Indian stocks to “overweight” in November, based on expectations of widespread growth independent of the global economic situation. Nomura Securities also rates Indian stocks as “overweight” due to expectations of profit growth and high liquidity.
Taiwan – Breakthrough with the Semiconductor Industry Recovery
Taiwan, an export-dependent economy, is also attracting the attention of investors. As of October 2023, a total of $3.2 billion has flowed into the Taiwanese stock market, surpassing the $3 billion influx into India. This is mainly driven by hopes of a recovery in the semiconductor industry.
Taiwan’s TWSE stock index, which focuses heavily on technology, has recorded its highest increase this year. Investors are seeking opportunities in this sector, based on confidence in the recovery of the semiconductor industry and sustainable growth.
Global Trends – The Acceleration Of The US Dollar And Capital Flow Shift
An important part of this trend is the slowing pace of the US dollar, especially after global investors began observing interest rate reduction measures from the US Federal Reserve due to a decrease in the US labor market. The South Korean won and the Taiwanese dollar have increased by 3% against the US dollar since late October, helping alleviate interest rate pressure on US-dollar-denominated debt.
Shinya Harui from Nomura Securities emphasizes that, with the reduction in the pressure of currency depreciation, countries have room to further lower interest rates. This belief reflects the view that lower interest rates can support the economy while boosting corporate profits.
While India and Taiwan appear as bright spots, the Chinese stock market is undergoing a price decline phase due to concerns about the real estate market’s downturn and negative impacts on the economy. The Shanghai Composite Index (SCI) has dropped below 3,000, and the Hang Seng Index in Hong Kong hit the lowest point of the year on Tuesday. According to EPFR, $1.1 billion has been withdrawn from Chinese funds targeting emerging markets since October 2023.
In total, with the combination of strong domestic economic factors, significant industrial growth, and global interest rate relief, India and Taiwan are emerging as bright spots in the overall picture of the international financial market. Smart investors are keeping an eye on the excellent opportunities that these countries bring.
Reference: Nikkei Asia
By. Pham Thanh Bien
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