Emerging markets continue to demonstrate strength independent of US political developments, with regional trade and domestic growth drivers taking centre stage, according to Aubrey Capital Management Investment Manager John Ewart.
Despite US political headlines grabbing attention of markets, Ewart points to the growing self-sufficiency of emerging markets, particularly in Asia where intra-regional trade now accounts for nearly 60% of total trade. He highlights how Chinese companies have strategically built capacity across the region to both mitigate international tariff impacts and serve growing regional demand.
Ewart’s comments come as Chinese hedge fund-backed firm DeepSeek makes waves globally after releasing an AI model rivalling those of US tech giants, despite using significantly fewer resources. The development highlights the growing capabilities of emerging market companies to compete with and potentially outmanoeuvre their Western counterparts.
“Many companies that operate in their domestic economy or local region have few dealings with developed nations such as the US or in Europe,” says Ewart, pointing to successful examples from 2024 like India’s Zomato, Singapore’s SEA, and China’s Trip.com.
The investment manager draws particular attention to India’s momentum and the “Make in India” initiative, which has attracted significant foreign investment. Whilst acknowledging India’s premium valuation compared to the MSCI EM Index, Ewart argues the market’s performance – having more than doubled since 2014 compared to the index’s 12% – justifies the premium.
On China, whilst noting recent stimulus measures have catalysed investor interest, Ewart maintains a selective approach, favouring financially healthy businesses amid broader economic challenges. He points to positive developments in consumer spending, particularly in travel and new vehicle purchases, supported by China’s robust 40% savings rate.
“Our focus as investors is less on the fears on political headlines, but rather on the aspirations of consumers and business in the GEM region for the longer term, structural growth opportunity for 2025 and beyond,” Ewart says.
