Emerging stocks counterattacked, outperforming U.S. stocks in a single month and rising 9.7% in September

Emerging markets have experienced a significant turnaround recently, outperforming U.S. stocks since their low point on September 6. This resurgence has been fueled by several factors, including strong economic growth, rate cuts from various central banks, and stimulus measures from China. With the price-to-earnings ratio in emerging markets still appealing, and the U.S. Federal Reserve likely to continue its rate-cutting strategy, this positive momentum could continue.

According to Bloomberg data, the MSCI Emerging Markets Index has rebounded 9.7% since September 6, outpacing the S&P 500’s 6.3% gain during the same timeframe.

Market analysts have dubbed this performance a “major comeback.” As of September 5, the MSCI Emerging Markets Index was up 5.1% for the year. While this is still behind the S&P 500’s 15.4% increase, it highlights significant growth potential—largely driven by the Fed’s rate cuts aimed at sustaining U.S. economic growth along with China’s supportive measures, including reductions in bank reserve requirements and mortgage rates to stimulate its economy and bolster its stock market.

Global economic strategist Koestel notes that past pressures on emerging markets have arisen from long-term low oil prices and a strengthening dollar. Since many large companies in Latin America are oil producers, the appreciating dollar tends to decrease the value of stocks outside the U.S.

Looking forward, emerging economies are poised to benefit from the combined support of positive growth prospects and central bank interest rate cuts. For instance, Vietnam’s GDP growth for the third quarter is projected at 7.4% year-on-year, surpassing market expectations of 6.1% and accelerating from a revised 7.09% in the second quarter. This marks the highest growth rate in two years.

Moreover, India’s central bank is expected to cut rates by 25 basis points to 6.25% on the 9th, while South Korea’s central bank is anticipated to lower rates by the same margin to 3.25% on the 11th. These moves could provide additional support to their respective stock markets.