Market Analysis2025-09-26

Emerging Markets Recovery Signals: China & India ETFs and Expanding Global Diversification Opportunities

Emerging market ETFs are showing signs of a rebound, driven by China's stimulus policies and India's sustained growth. With the easing of dollar strength, the appeal of investing in emerging markets is rising, making this an opportune time to consider increasing allocation to emerging market ETFs from a global diversification perspective.

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Emerging markets, which had faced concerns over a global economic growth slowdown, are now showing signs of recovery. In particular, the Chinese government's aggressive stimulus policies and India's robust economic growth are driving improved performance among emerging market ETFs. As the strength of the US dollar eases, the relative attractiveness of emerging market currencies and assets is increasing, making it necessary to reassess emerging market allocations within a global diversification strategy using a portfolio calculator.

Impact of China's Real Estate and Manufacturing Stimulus Measures

As the Chinese government has announced a large-scale policy package aimed at stabilizing the real estate market and strengthening manufacturing competitiveness, investor sentiment toward China has improved. In particular, Chinese companies are enhancing their global competitiveness in new energy sectors such as electric vehicles, solar power, and batteries. ETFs like MCHI (China ETF) and FXI (China Large-Cap ETF) are benefiting from these policy effects. Additionally, infrastructure investment and consumption stimulus tied to the Hangzhou Asian Games are also generating positive expectations.

Sustained Growth Drivers of the Indian Economy

India continues to maintain a solid economic growth rate of around 7%, establishing itself as one of the fastest-growing major economies in the world. Growth is underpinned by the expansion of digital payment systems, rising IT services exports, and a broadening manufacturing base. ETFs such as INDA (India ETF) and MINDX (India ETF) are benefiting from this structural growth. In particular, a young demographic profile and an expanding middle class provide strong support for long-term growth potential.

Recovery in Southeast Asia and Latin America

Southeast Asian countries such as Indonesia, Vietnam, and Thailand are also showing economic growth momentum, driven by the recovery in tourism and an increase in exports. Meanwhile, Latin American nations including Brazil and Mexico are showing early signs of economic recovery alongside stabilizing commodity prices, benefiting broad-based emerging market ETFs such as VWO (Emerging Markets ETF) and EEM (Emerging Markets ETF). These countries are also drawing attention as alternative manufacturing hubs amid the ongoing restructuring of trade with the United States.

Dollar Weakness and Improving Emerging Market Investment Environment

The investment environment for emerging markets is improving as the US rate hike cycle comes to an end and dollar strength moderates. A weaker dollar enhances the relative attractiveness of emerging market currencies and eases capital outflow pressure, exerting a positive influence on equity markets. Rising commodity prices are also supporting economic growth in resource-rich nations, brightening the medium- to long-term outlook for emerging market ETFs.

Conclusion

Recovery signals in emerging markets are opening up new opportunities from a global portfolio diversification perspective. Particularly given their relatively undervalued valuations compared to developed markets and high growth potential, now is a good time to consider increasing the appropriate allocation to emerging market ETFs. Use the rebalancing calculator to determine the optimal weighting for emerging market assets within your globally diversified portfolio.

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