China and emerging markets show resilience in 2025

Global investment strategies are being reshaped as uncertainty in the United States and growing financial fragmentation alter capital flows.

Against this backdrop, emerging markets and China have demonstrated notable resilience, attracting investors seeking diversification, yield and long-term growth. Shifting trade patterns, easing monetary policy expectations and relative valuation advantages have all contributed to renewed interest across these regions.

LSEG Data & Analytics recently delved into the resilience of China and emerging markets during market fragmentation. 

Over the past decade, higher interest rates in emerging economies have not prevented BRICS currencies from weakening against the U.S. dollar. The dominance of U.S. equities, fuelled by a prolonged technology boom, alongside the unparalleled liquidity of U.S. Treasuries, has continued to attract global capital, it said.

While a weaker dollar would typically be expected to support U.S. exports, recent data suggests limited movement on that front, with more pronounced changes occurring on the import side. A notable rise in gold imports over the summer points to persistent concerns around volatility and inflation, as consumers seek hedges against economic uncertainty.

Emerging markets, however, have delivered strong performance, it said. Indices tracking emerging market assets are on course for their best year since 2017, with sovereign debt outperforming nearly all other fixed income categories. Local currency government bonds have delivered returns of around 15% year-to-date, more than double those of U.S. high-yield corporate bonds and well ahead of the Bloomberg U.S. Treasury Index, LSEG stated. Countries including Brazil, Mexico, Colombia, Hungary and South Africa have each posted gains exceeding 23%, reflecting improving investor sentiment.

The appeal of emerging markets is underpinned by their growing share of the global economy. These regions account for the majority of the world’s population and labour force, more than half of global GDP and a significant share of global exports and natural resources. Compared with the U.S. and Europe, emerging markets appear attractively valued, supported by a softer dollar and favourable long-term growth prospects.

China occupies a distinct position within emerging markets. While maintaining accommodative monetary policy amid deflationary pressures, its trade performance has remained resilient. Exports have exceeded expectations, supported by diversification away from the U.S. towards ASEAN, Africa and Latin America.

As financial fragmentation deepens, opportunities across emerging markets continue to expand. With shifting trade alliances, attractive valuations and easing global monetary conditions, these regions are increasingly central to global portfolio strategies.

Read the full story here.

The post China and emerging markets show resilience in 2025 appeared first on FinTech Global.