Multiple factors weigh on emerging markets assets

Emerging market assets performance will be affected by China’s impact on the global economy, governments’ anti-coronavirus measures, market risk sentiment, and US dollar trend in the second half, an analyst said.

Wei Zhen, head of Asia Pacific index solutions research at MSCI, said the China is the major driver of Asian market growth in the first half, with biotech and technology assets outperforming, and energy, finance, and property underperforming.

In the context of emerging-markets allocations, however,  China’s index weight does not significantly trail its GDP or economic exposure weight, Wei said.

if China continues to improve its market accessibility and addresses remaining areas of investor concern, the inclusion ratio of China A-shares could rise further, which will reach around 50 percent of the MSCI EM Index at 100 percent inclusion, he added.

He also said emerging markets represent about 38 percent of global GDP or economic exposure weight but makes up only 11 percent of the cap-weighted index.