Emerging Capital Markets Newsletter – 1Q25

Emerging markets saw mixed performance in Q1 2025. China led with a 15% gain in the MSCI China Index, fueled by AI-driven optimism, while Brazil rose 12% on easing inflation. India lagged as investors rotated into China amid concerns over a cyclical slowdown and weak earnings. However, these gains were swiftly erased after Trump’s “Liberation Day” tariff announcement, triggering global market turmoil. As risk sentiment deteriorated, capital flows reversed and volatility spiked across emerging markets. While some stability has returned following a temporary pause in new tariffs, investor caution remains elevated, with near-term performance likely to hinge on geopolitical developments and policy clarity from major economies.