Easing trade tensions bode well for emerging market stocks

Easing trade tensions bode well for emerging market stocks

SeattlePI.com

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LOS ANGELES (AP) — Several factors are pointing to a possible rebound in emerging market stocks this year.

Stocks in China and other developing economies notched solid gains in 2019, but lagged the blockbuster market returns delivered by publicly traded companies in the U.S. and other developed economies.

The U.S.-China trade war and signs of slowing global economic growth clouded the outlook for emerging market stocks for much of last year, limiting share price gains.

Now, many Wall Street analysts are bullish on emerging market stocks. They point to the limited "Phase 1" trade deal signed this month by Washington and Beijing. The deal, while not removing billions in U.S. tariffs on Chinese goods, has eased trade tensions between the world's two biggest economies.

That's helped quell concerns that the economy in China and other emerging markets might slow this year and raised expectations for improved company earnings.

"In emerging markets, where economies are heavily dependent on on trade, the lower trade-related risk should flow through to improved sentiment and eventually improved (economic) activity data," said Alejo Czerwonko, emerging markets strategist at UBS Global Wealth Management. "We believe emerging market earnings are set to recover in 2020 from a depressed base in 2019."

Emerging market stocks bounced back last year following a dismal 2018.

The MSCI Emerging Markets Index, which tracks the performance of stocks in more than two dozen developing economies, posted a gain of 18.4% in 2019. It posted a loss of 14.6% the year before.

Still, that growth trailed markets in developed economies. Consider that the MSCI World Index, which is comprised of stocks in 23 developed markets, increased 27.7% last year. Meanwhile, the S&P 500 index, the benchmark...

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