China's economic recovery + the U.S. postponing tariffs, emerging market assets are expected to achieve the best weekly performance since March

According to the Zhitong Finance APP, emerging market stocks and currencies are experiencing their best week since early March due to optimistic expectations for the Chinese economy and U.S. President Donald Trump's postponement of certain tariffs.

Despite most markets being closed for the Easter holiday, the MSCI Emerging Markets Index still rose on Friday, bringing its weekly gain to 2.2%. Commodity-related currencies, including South Africa's, performed well this week, pushing the benchmark index close to a six-month high.

Emerging market assets have gone through a three-week sell-off due to tariff escalations and concerns that the U.S. economy may fall into recession, but they are now stabilizing. The market remains tense as Trump frequently swings between threats and exemptions, causing valuations to be susceptible to fluctuations triggered by news reports. Some investors are shifting their focus to non-tariff themes such as valuations and Chinese consumer demand.

Sammy Suzuki, head of emerging market equities at Invesco, stated, "We clearly do not know what will happen next. However, we should consider the possibility of both an escalation and a thaw in the trade war. Are there companies that can succeed in both scenarios? I believe investors should ultimately focus on fundamentals and valuations."

The performance of emerging markets on Friday also benefited from Trump's remarks, in which he expressed reluctance to continue raising tariffs on China, as this could hinder trade between the two countries. The MSCI Emerging Markets Index has recovered more than half of its losses from late March and early April, with the Chinese and Indian stock markets being the main drivers of the index's rise.

Emerging Market Stock Market Rebound

Due to most markets being closed for Good Friday, overall trading volume in emerging markets shrank. As of the time of writing, the total trading volume of the index was 95% lower than the 30-day average.

The foreign exchange market also saw slight fluctuations. The major emerging market benchmark index fell by less than 0.1% on Friday but is still expected to accumulate gains for the week. Arbitrage traders have made profits for the fourth consecutive week, marking the longest winning streak since January 2023.

The Central Bank of Turkey restarted a week-long repo auction after an unexpected interest rate hike. The country's 10-year government bond yield fell for the second consecutive day, dropping 43 basis points on Friday. Morgan Stanley stated that it is "cautiously" restarting lira arbitrage trading