Policy support in China should drive earnings recovery further within the market, but other bright spots exist outside of China. (UBS)

While China’s economic growth outlook remains crucial to emerging market (EM) performance, there’s more to EMs than China. India and Indonesia offer attractive opportunities too, in our view.


China’s accelerating policy response should improve the economy.

  • Housing measures introduced in late August including the cut in mortgage down payment ratios and relaxation of the “first-time homebuyer” definition were impactful.
  • Economic indicators such as manufacturing activity and inflation appear to be bottoming out.
  • We expect the policy impact to be more evident in the upcoming data, and believe recent policy support can push GDP growth close to the official target this year.

However, there’s more to emerging markets than China.

  • While China is the largest market constituent of the MSCI Emerging Markets Index, it still only makes up about 30% of the benchmark.
  • The 23 other markets that make up the remaining 70% of the index have collectively outperformed MSCI China.
  • The MSCI EM ex-China index has outperformed MSCI China by over 15pps this year and a significant 36pps since the start of 2021.

India and Indonesia’s structural growth prospects provide opportunities within EMs.

  • India is the world’s most populous country, and we expect it to account for a fifth of global economic growth in the next three years.
  • Indonesia’s domestic economy should remain strong, in our view, supported by external surpluses and a surge in foreign domestic investment.

Did you know?

  • China in mid-August again vowed to reach its 2023 GDP growth target of 5%. Given current forecasts, we anticipate full-year growth of near 4.8%.
  • India’s working age population is estimated to expand by 82.6 million by 2030. We expect India to become the third biggest economy globally by the end of this decade.
  • Indonesia is seeing a revival in FDI, with inflows of USD 21.6bn over the last four quarters making it the second largest destination for foreign investments in Southeast Asia.

Investment view

Emerging market equities remain most preferred within our global strategy. Within Asia, we favor China, India, and Indonesian equities tactically.


Main contributors - Kathy Li, Philip Wyatt, Hartmut Issel, Delwin Kurnia Limas, William Choo


Original report - Where are the bright spots in emerging markets?, 18 September 2023