1. Earnings: Consensus forecasts call for 18% earnings growth for the MSCI Emerging Markets Index in 2024, which compares to a forecast 9% contraction in 2023. Expectations for next year have held steady since in recent months. China, Taiwan and Mexico have driven forecasts lower for this year. Looking ahead, a recovery in South Korea, Taiwan and China is expected to drive the rebound in 2024, with the technology sector the main driver.

2. China’s property measures target demand: Tier-1 cities in China are lowering mortgage downpayments for second homes to 40% from 70-80%. Shenzhen is the second city after Guangzhou to implement the change. This follows similar cuts to downpayments for primary homes to 30%-35% earlier this year. Policies on home value bands, which also impact downpayments, have been raised in tier-1 cities. The changes are designed to increase housing affordability and demand.

3. US dollar weakness: A faster-than-expected drop in inflation and dovish comments on interest rates by US Federal Reserve governor Christopher Waller pushed bond yields and the dollar lower in November. The greenback has weakened 3.4% since its October high. A weaker US dollar creates easier financial conditions in emerging markets as central banks do not need to use interest rates as a tool to support the local currency. A declining greenback also reduces the cost of foreign currency debt in local currency terms. This eases the financing burden on companies in emerging markets (EMs).

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