Despite a challenging macroeconomic environment, India remains an attractive destination for emerging markets investors. Many investors are diverting funds from other emerging markets to dedicated India funds. Even with recent geopolitical volatility, India sustains healthy capital allocation. India’s GDP is projected to grow from $3.5 trillion in 2022 to $7.3 trillion by 2030.
The VanEck Emerging Markets Fund marginally outperformed the MSCI Emerging Markets Investable Market Index in Q3 2023, largely driven by successful stock selection in Turkey, Georgia, and Kazakhstan. Fund performance was negatively impacted by its Brazil allocation. Standout contributors included Bank of Georgia and Kazakh payments platform Kaspi.kz. The fund focuses on identifying long-term growth companies at a fair price through robust due diligence.
Despite hurdles in 2023 involving geopolitical risk and high savings rate, China’s economy remains a key diversification option from U.S. equities for investors. The IMF has upgraded China’s growth projections, warranting a closer look at investment options like the KraneShares CSI China Internet ETF (KWEB). This upgrade, along with potential fiscal reforms and increased consumer spending, present a promising investment case for China.
While emerging market ETFs lag behind S&P 500, they register combined net inflows of $6.5 billion. Advisors have concerns over “China-specific risks” and “volatility”. As China forms a large part of emerging markets, several ETFs omit Chinese stocks to avoid these risks. Other options include ETFs owning less volatile Chinese stocks or ETFs providing exposure to the Chinese internet sector with downside protection.
China has imposed export controls on graphite, a key component used in electric vehicle (EV) batteries, starting from 1 December. It cites national security concerns and is not targeting any specific country. The move comes amidst escalating tension in the EV supply chain between Beijing and the West. China, leading the global supply chain of critical minerals, could potentially disrupt the market dynamics and accelerate the search for alternative material sources.
Core Values Alpha (CVA), an affiliate of MSA PowerFunds, has introduced an actively managed exchange-traded fund (ETF) for Chinese equities. The fund invests in high-growth Chinese companies and US companies with substantial revenue from China while prioritizing US values and national security. To this end, it uses a China Risk Scorecard for in-depth risk assessments. The fund believes that carefully navigating China risks can benefit investors amid rising geopolitical complexities.