‘Economic transformation’ drives renewed EM appetite: Ninety One

Underpinned by “structural reform, stronger fundamentals and sectoral innovation”, emerging markets (EM) have continued to shed their ‘risky’ reputation and surfaced as a quality investment, according to commentary from global investment manager, Ninety One.

China Equities Portfolio Manager, Wenchang Ma, said ongoing “economic transformation and the broader evolution” of China and EM is paving the way for investors to capitalise on long-term, diversified opportunities.

“For much of the past decade, China was considered the growth engine of emerging markets, only to fall short of expectations in recent years,” she said.

“Investors endured lacklustre equity returns, policy crackdowns and persistent geopolitical headwinds. Between August 2021 and August 2024, the MSCI China Index fell by 35.5%, even as the MSCI ACWI gained 18.4%.

“Now, with policy shifts, renewed shareholder focus, and economic transformation underway, China may be at a turning point. September 2024’s rally lifted valuations from decade lows, with the MSCI China All Shares Index gaining c.23%.

“Crucially, that rebound has since proved more durable, with almost 75% of the subsequent 12 monthly index returns from October 2024-September 2025, proving positive. But does this mark the start of a more durable recovery?”

Ma highlighted several long-term opportunities located in emerging markets that reflect global megatrends that define the next decade, including”

• Decarbonisation: China now leads globally in solar, batteries, and electric vehicles.
• Healthcare: driven by demographics and rising demand for insurance and infrastructure.
• Technology and consumer innovation: reshaping behaviour and creating new channels for growth.

“China’s transformation reflects a broader evolution across emerging markets. Once viewed as inherently volatile, EM equities have shown remarkable resilience,” she said.

“Ten years ago, EM equity volatility was 1.5–2 times that of developed markets; today, it has converged, underpinned by stronger fundamentals and improved policymaking.

“This shift aligns with the longer-term “dual circulation” strategy, which emphasises domestic consumption and innovation alongside global trade.

“Realising this vision requires greater investment in healthcare, education, and social security to bolster household confidence and reduce precautionary savings.”

However, while certain risks – such as “geopolitical frictions, demographic challenges and uneven policy execution” – remain, Ma emphasised strong fundamentals have elevated China and EM further into the mainstream for investors.

“Reforms in governance, fiscal discipline, and monetary frameworks have narrowed the gap with developed markets,” Ma said.

“During recent global shocks, from the pandemic to geopolitical turbulence, EM volatility has been comparable to or even fallen below that of developed markets.

“This structural shift has elevated emerging markets into a higher-quality, more resilient asset class. For asset allocators still underweight, the case for reassessment is compelling.

“With greater resilience and a broader opportunity set than in the past, China and its emerging market peers can now play a more meaningful role in building diversified, forward-looking portfolios.”