Mobius joins Goldman Sachs bet on China boost for emerging-market equities
‘The total pool of money coming into emerging markets will expand,’ veteran investor says. ‘You will see this whole market move.’
Emerging-market equities will be boosted by stimulus measures in China thanks to the country’s large weightings in indices and close economic ties with other developing countries, according to veteran investor Mark Mobius and Goldman Sachs strategists.
China accounts for one quarter of the benchmark MSCI EM equity index, which means that when China markets rally, the index also moves up. Stimulus measures, coupled with a Federal Reserve interest-rate cut, helped emerging-market equities jump 10 per cent from mid-September lows.
China’s easing has broadened the emerging-market equity rally, which has been powered by outsize gains in heavyweight Chinese equities, Goldman strategists including Kamakshya Trivedi wrote in a note. These have risen nearly 40 per cent from their lows, with China’s outperformance against the rest of the emerging markets in the past three weeks at its widest in the past 25 years.
They said they expect further upside in emerging-market equities, with spillovers from China’s growth in several countries such as South Korea, Malaysia and South Africa.
Goldman Sachs has raised China to overweight from the market weight in its Asia strategies.
Emerging-market stocks funds had their highest weekly inflows through October 9, with US$41 billion, Bank of America said, citing EPFR Global data. China equities had record inflows of US$39.1 billion in the week.
