American investment bank JP Morgan has turned bullish on emerging market equities, placing India among its top picks along with the Philippines, Brazil, Chile, Greece, Poland, and the UAE.
“We upgraded our EM vs DM stance from underweight to Neutral, and now move it further up to overweight,” the JP Morgan report stated.
Emerging markets underperformed developed markets (DM) for four years, lagging by 40 per cent since 2021.
However, this year, emerging markets have shown signs of recovery.
“So far this year, EM are trading somewhat better, up mid-single digits vs DM, and up 2% relative year-to-date excluding China,” the report noted.
JP Morgan’s EM strategy team prefers countries with strong domestic demand, such as India, the Philippines, Brazil, Greece, Poland, and the UAE. It also highlights Chile and Korea for their unique growth catalysts.
Chinese equities, the report noted, suffered a sharp 13 per cent fall after Liberation Day but regained most of the losses following a temporary 90-day trade truce with the US.
The US reduced tariffs on Chinese imports from 145 per cent to 30 per cent, while China lowered tariffs on US goods from 125 per cent to 10 per cent.
JP Morgan, however, believes the 90-day window may not be sufficient to finalise a US-China trade deal.
“We do not expect the US to adopt an aggressive trade stance post 90 days, which could support EM equity performance,” it added.
On sectoral trends, the bank pointed out that the Mining sector has historically performed well when EMs outperform DMs.
“We reiterate our double upgrade of the Mining sector done in March, after years of a cautious stance,” the report said.
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