Emerging markets are bouncing back
The MSCI Emerging Markets index plunged by 33% between 1 January and 23 March as economies locked down. But it has since rallied by 68%.

Investors in emerging markets are finishing the year on a profitable note, but few would have predicted that back in March. The MSCI Emerging Markets index plunged by a stomach-churning 33% between 1 January and 23 March as economies locked down in response to Covid-19. That was then followed by a 68% rally, leaving the index up by 13% for the year as of mid-December, virtually the same as the average gain for all world markets. Emerging market shares are now trading at the same level as they were in January 2018 in US dollar terms. The rest of that year was a washout, but gains over the last two years have finally erased the losses of 2018.
There were significant differences in performance between emerging markets, a capacious and unwieldy category that includes everything from kleptocratic commodity exporters to Asian manufacturing tigers. Latin America disappointed, with both Brazil’s Ibovespa and Mexico’s IPC indices essentially flat over the year. Chile’s IPSA index is down 15% in a year that saw voters approve plans to re-write the constitution.
Argentina’s Merval index shrugged off a government bond default to rocket 27%, but the benefit to most investors will be limited: the country makes up a negligible percentage of the main MSCI indices and was almost booted from the emerging markets index again this year owing to its capital controls. Russian stocks soared 39% in 2019, but had a more muted 2020, rising 6%. The market slumped on this year’s weak oil prices, but has roared back since November as Brent crude returned to $50 a barrel.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Investors look east
This has been a difficult year in most emerging markets, says Mary McDougall in Investors Chronicle. Many have struggled to contain the virus and contended with lower tourism receipts and weak oil prices. But you wouldn’t think that looking at the index, which is heavily weighted towards east Asia: China, Taiwan and South Korea collectively account for almost two-thirds of the MSCI Emerging Markets index. Their strong performance has dwarfed disappointments elsewhere.
Korea’s Kospi index registered a 27% gain thanks to a robust response to Covid-19 and a global manufacturing upswing in the summer and autumn. Many wonder if South Korea should be classified as an emerging market at all, says Tom Sieber in Shares magazine. While the MSCI Emerging index includes it, the alternative FTSE Russell has considered it a developed market since 2009. The home of Samsung is clearly a developed economy (its GDP per capita is comparable to that of Spain), but restrictions on currency conversion and some financial products mean its stockmarket is judged to fall just short of the “developed market” standard for now.
Other Asian manufacturing economies have had a similarly buoyant year. China’s CSI 300 index is up 20% for the year-to-date, with Taiwan’s TAIEX up 17.5%. Vietnam’s VN-index has advanced 11% this year. India has not coped as well with the virus as its east Asian peers, but its BSE Sensex is still finishing the year up by a profitable 13.5%.
Not all Asian markets were so happy. A year of civil unrest in Thailand saw the local SET index fall by 7%. Hong Kong’s Hang Seng is down 7% after a turbulent year for the city, despite a string of high-profile flotations.
Inflows hit seven-year high
Hopes of a global upswing have seen foreign investors rush into emerging markets this quarter, which look set to see the biggest quarterly inflows in seven years, says Jonathan Wheatley in the Financial Times. Some fear things are getting overheated, but emerging markets should benefit from several tailwinds: stronger commodity prices, recovering tourism, a weaker dollar and loose monetary policy that forces investors to go hunting for returns. Next year “could be a breakout year for emerging markets”, says Christopher White of Somerset Capital Manageme
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Which investments can I hold in a stocks and shares ISA – and which ones are banned?
HMRC has a list stating which investments are allowed in ISAs, but sometimes investors, and even ISA providers, get confused by the rules. Here’s what you need to know when picking your investments.
By Ruth Emery
-
Review: Andronis Minois and Andronis Arcadia – two Greek island idylls
Travel Andronis Minois on Paros and Andronis Arcadia on Santorini are two beautiful, authentic hotels on two different islands in Greece
By Nicole García Mérida
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
By Cris Sholto Heaton
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
By Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global markets
Opinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
By Peter Walls
-
Falling revenues and mounting debt spell trouble for Jumia Technologies
Struggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
By Dr Matthew Partridge
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?
Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
By Dr Matthew Partridge
-
Best of British bargains: cash in on undervalued companies in the UK stock market
Opinion Michael Field, Chief Equity Market Strategist, EMEA, Morningstar, selects three attractive UK stocks where he'd put his money
By Michael Field
-
Building firm Keller presents low debt and ample scope for growth
Geotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
By Dr Mike Tubbs
-
PZ Cussons share price down 75% in last decade – why it's one to watch
Opinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
By Jamie Ward