Market Insight

Emerging markets experienced a remarkable surge in September, climbing over 7% in dollar terms, marking their strongest month since November of last year.

While sterling investors saw slightly lower gains of 5.5%, emerging markets still delivered strong relative performance, outperforming their developed market counterparts by 5% during the month.

What Caused the Surge?

This recent rally was primarily driven by the performance of Chinese stocks, which dominate the emerging markets index. In the final week of September, the People’s Bank of China announced a $114 billion stimulus package, providing a significant boost to the stock market. The package has been characterised as an attempt by China to boost consumption and support capital markets, as well as the ailing property sector, which has been embroiled in a number of crises in recent years.

This effort to stimulate economic growth, which is at risk of failing to meet its 5 percent target for the year, sparked comparisons to a similar measure taken in response to the global financial crisis. Notably, the Chinese stock market index rose 15.7% in the week that followed, marking its strongest performance in such a timeframe since November 2008. Similarly, Hong Kong’s Hang Seng index also exhibited an impressive response.

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