Emerging markets are experiencing a significant influx of foreign investment, with foreign investors adding approximately $273.5 billion to equity and debt portfolios in 2024. This figure marks a substantial increase of nearly $100 billion compared to the $177.4 billion added in 2023, highlighting a robust recovery in investor confidence [3388955b].
The inflows were predominantly directed towards fixed income, with $219 billion allocated to debt outside of China and $54.2 billion to Chinese debt. Notably, Chinese equities saw an inflow of $11.3 billion, while other developing economies faced a loss of $11 billion. This trend indicates a selective investment strategy among foreign investors, favoring certain markets over others [3388955b].
Despite the positive investment figures, challenges remain for emerging markets, particularly due to the impact of US economic growth and a strong dollar. Jonathan Fortun, an economist at the Institute of International Finance (IIF), noted that the dovish stance of the Federal Reserve could provide support for emerging market assets, potentially offsetting some of the pressures from the US economy [3388955b].
In December alone, emerging market portfolios saw an addition of $14.4 billion, despite an overall trend of stock outflows. Latin America led the way in inflows with $6.6 billion, followed closely by Emerging Asia, which attracted $5.3 billion [3388955b].
The recent report by AXA Investment Managers also emphasizes the cautious optimism surrounding emerging markets, projecting that while growth steadied in 2024, the outlook for 2025-2026 remains uncertain due to ongoing geopolitical risks and trade dynamics [1457a0d6]. Ruchir Sharma, Chairman of Rockefeller International, highlighted the potential of emerging markets, particularly India, while also pointing out that other regions may offer better value for investors [c90e2b51].
Overall, the landscape for emerging markets is evolving, with foreign investment playing a crucial role in shaping their economic trajectory. As these markets navigate the complexities of global economic pressures, the resilience and adaptability of their economies will be key to sustaining growth [1457a0d6][5f86d842][3388955b].