Emerging-market stocks extended their upward momentum for a second consecutive day, with the benchmark gauge steering towards a three-week high on the back of rising corporate earnings confidence. The MSCI Emerging Markets Index notched its seventh advance in eight sessions, hovering near its highest level since early April. Analysts’ average earnings forecasts for the next twelve months have now risen to their most optimistic levels since November 2016, when Donald Trump secured the US presidency.
April, initially a turbulent month for emerging-market equities, now sees losses rapidly diminishing. These markets are finding strength in the declining allure of US assets and a weakening dollar. Concerns about China, a significant drag earlier in the year, are also subsiding. Recent data reveal a strengthening Chinese economy, accompanied by government commitments to bolster both domestic industries and exporters.
Michael Brown, a senior research strategist at Pepperstone Group Ltd, attributes much of the rally to a broad “sell America” trend, fuelled by persistent policy uncertainty from the Trump administration. Brown believes the momentum could persist, particularly favouring countries that successfully finalise new trade agreements with the United States. Such deals, permanently reducing tariffs, would position these nations to outperform their peers. He emphasised that emerging-market growth potential, particularly outside China, appears logical as Asia-Pacific nations move swiftly to secure advantageous positions within reconfigured global supply chains.
Recent gains have pushed the MSCI Emerging Markets Index above its 200-day moving average, a notable technical milestone. Should April conclude positively, it would mark the first time since 2019 that emerging markets have posted gains for each of the first four months of the year. Earnings estimates for the benchmark index have climbed 0.8% in April alone, the most robust rise since last August.
In currency markets, traders adopted a more cautious tone, focusing on the progress of US trade negotiations and the release of crucial economic data from the US and China. The main developing-nation currency index held steady. Thailand’s baht was among the weaker performers, pressured by falling gold prices and increasing expectations of a domestic interest rate cut.
Optimism surrounding trade negotiations intensified after Treasury Secretary Scott Bessent indicated that an “agreement of understanding” with South Korea could be reached imminently. Bessent also highlighted that discussions with several Asian partners were progressing rapidly, boosting sentiment across emerging markets.
The EMFX index, tracking emerging-market currencies, has advanced by 0.9% this month, poised for its strongest performance since September. Eastern European currencies led the gains, buoyed by a stronger euro, while the Mexican peso outperformed among Latin American currencies after avoiding new tariffs from the US.
Investors are closely monitoring upcoming US data releases, including GDP and inflation figures, to assess the broader economic impact of Trump’s trade policies. Meanwhile, Chinese officials reaffirmed their commitment to economic support ahead of key factory activity reports, further stabilising investor sentiment.
Among standout performers, Angola’s sovereign bonds posted some of the largest gains. After discussions with the International Monetary Fund last week regarding potential financial support, Angola is seeing renewed interest from investors, following a prolonged shutdown from international debt markets triggered by trade disputes and declining energy prices.
Emerging-market investors are now witnessing the convergence of improved earnings, favourable trade dynamics, and stabilising economic indicators, creating a fertile ground for further upside in the months ahead.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
