Emerging Markets Navigate Uncertainty Amid US Election Tension

Emerging market stocks gained momentum due to China's strong performance, but investor sentiment remains cautious amid the uncertain U.S. election. Analysts noted Chinese and Mexican assets as vulnerable to Trump's win. Economies like Vietnam and Morocco may thrive regardless of U.S. leadership, while volatility impacts currencies like the Mexican peso.

Emerging market stocks experienced an uplift on Tuesday, bolstered by China's strong performance, while cautious investor sentiment prevailed due to the uncertain US election. The MSCI gauge for EM equities rose 0.8%, reaching a one-week high, as Chinese stocks soared to a four-week peak following robust service sector growth.

Chinese Premier Li Qiang's confidence in meeting the country's growth target of around 5% further improved sentiment. However, a currencies gauge remained flat, with currencies from China, India, and Turkey showing little movement. Analysts anticipate heightened volatility as US election results emerge.

The presidential race between Donald Trump and Kamala Harris is tight, with potential impacts on Chinese and Mexican assets due to Trump's tariff threats. Analysts warn that other Trump policies could increase dollar value and U.S. Treasury yields, affecting foreign investment in developing markets. Emerging economies like Vietnam and Morocco are expected to fare well under any U.S. administration.

(With inputs from agencies.)