There’s more to emerging markets than China. (UBS)

While China’s growth outlook remains crucial to EM performance, there’s more to emerging markets 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 a cut in mortgage downpayment ratios and the relaxation of the “first-time homebuyer” definition mark the most forceful property easing of late.
  • Economic indicators such as manufacturing activity and retail sales 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 of 5% this year.

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

  • While China is the largest market constituent of 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.
  • MSCI EM ex-China index has outperformed MSCI China by over 13 percentage points this year and 33pps since the start of 2021.

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

  • We expect India, the world’s most populous country, to account for a fifth of global economic growth over the next three years.
  • Indonesia’s economy should remain strong in our view, supported by external surpluses and a surge in foreign domestic investment.
  • We recommend growth-based investors with Asia-tilted portfolios diversify toward India and Indonesia, seeing double-digit earnings growth for both markets in 2024.

Did you know?

  • Huawei’s flagship Mate 60 phone, which features a processor chip that is believed to be made-in-China, is an early sign that technological progress can still be made in the face of geopolitical pressure.
  • 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 past 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 Chinese, Indian, and Indonesian equities tactically.


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


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