Emerging market recovery stalled

Sources: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2005 to March 31, 2022. Bloomberg China Credit Impulse Index: monthly data from January 1, 2005 to February 28, 2022. The MSCI Emerging Markets Index captures large- and mid-cap representation across 24 emerging market countries, and 17 emerging markets, respectively, around the world. The Bloomberg Economics China Credit Impulse Index measures the impacts of new lending increments, or acceleration of credits, to GDP growth. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities. Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging markets.

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Key Takeaways

  • China’s credit impulse reversed sharply as policymakers reduced support to ward off financial risk.
  • The reduction in Chinese credit hit emerging market (EM) performance, despite better conditions in other emerging Asia countries. Credit conditions are slowly beginning to improve. However, EM equities still face a resilient U.S. dollar.