Emerging Market Stocks and Bonds: Forecasts and Opportunities for 2024 - Insights from a Financial Expert

Emerging Market Stocks and Bonds: Forecasts and Opportunities for 2024 - Insights from a Financial Expert

According to a report by finanzmarktwelt.de, the stock markets, foreign exchange and bond markets of emerging countries have recorded a significant increase since October. The MSCI benchmark index of emerging market stocks is expected to rise 7.0 percent this year, after two years of losses. Government bonds denominated in emerging market currencies are up 6.3 percent year-to-date, while U.S. dollar-denominated bonds are returning 12 percent. Risk premiums for bonds have fallen to their lowest level since summer 2021, as have the costs of hedging exposures to emerging markets.

Bloomberg data shows the U.S. dollar has lost nearly 3 percent against emerging market currencies this year, reflecting an expected U.S. Fed rate cut. Most emerging market currencies appreciated against the US dollar, with Latin American currencies the biggest gainers. For the coming year, Manik Narain from UBS predicts record gains of up to 10 percent on emerging market local currency bonds.

The future development of emerging markets also depends on geopolitical risks, particularly in the context of the upcoming US election. Former President Donald Trump is considered the front-runner for the Republican nomination, which could lead to global uncertainty.

Franklin Templeton's Head of EMEA ETF Capital Markets, Jason Xavier, advises clients to focus on tech-heavy emerging markets such as Taiwan, South Korea and India as they are well-positioned to benefit from the global buzz around artificial intelligence.

Overall, current developments point to a positive future for emerging markets, provided that geopolitical risks can be kept under control and the expected US Fed rate cut materializes.