Emerging Market Stocks Witness Strong Growth

Stocks in emerging markets such as Russia and Turkey have seen close to four days of consecutive gains. What has brought about the longest rise since October?

Emerging markets are usually associated with volatility in their stock markets, but today, 27 March, they are headed for their fourth consecutive day of rising stocks. The longest continual upward movement since October has continued with a 0.5 per cent increase in the FTSE Emerging Market index.

In the past two days, the Micex index in Moscow has jumped by 2.5 per cent, taking it higher than it was a week ago when the latest round of economic sanctions had not even been announced. In the face of political unrest, Turkish stocks are now at a two-month high.

So what has brought on this comparatively long period of growth? In part, at least, the brightening outlook in developed economies has filtered through to other markets. With the Federal Reserve continuing to wind back its asset purchase scheme, the US looks to be performing well – and with news having emerged today that consumer confidence is at a six-year high, sentiment will remain positive.

Since there is also evidence of burgeoning recovery in other major economies, it stands to reason that emerging markets will share in the gains of countries which often import from and trade with them. But as the Financial Times suggests, there are also investors who are worried that western markets are currently overvalued.

With the FTSE Emerging Market index still considerably down on the highs reached before the financial crisis, and stocks in some developed economies are at record levels, the former stand to benefit from bargain-hunting activity among those expecting emerging markets to keep growing.

To an extent, there was always likely to be a period of correction after last week’s Federal Reserve press conference. New chair Janet Yellen indicated that interest rates may rise much sooner than anyone had anticipated, prompting falling stocks in Hong Kong, Japan and Australia.

But the trend in the last few days seems to represent more than that. As the Fed continues with its plans to taper asset purchases and more economies begin to pick up speed, emerging markets will become an ever-more important element of global trade.