India’s election, China’s IPO pipeline and US interest rates are on the radar of our Emerging Markets Equity team in this issue. The team shares its latest outlook.
Three things we are thinking about today:
- India: Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) won the largest number of seats in the Indian election, albeit with a smaller number compared to the 2019 vote. Investors are looking to July’s budget for signals on the new government’s priorities. Recent data indicate an improving fiscal position, with scope for a reduction in the fiscal year (FY) 2025 budget deficit from the February interim budget forecast of 5.1%. Higher dividend receipts from the central bank and a lower FY2024 budget give Modi some optionality in deciding expenditure priorities.
- ͏͏͏China’s initial public offering (IPO) pipeline opens: Following a prolonged pause in Chinese IPOs on international exchanges outside Hong Kong, companies are once again preparing to list. This follows the successful listing of a Chinese luxury electrical vehicle manufacturer in the United States during the first quarter. It is likely that one of the world’s largest fast-fashion apparel companies will list its shares, potentially on the London Stock Exchange, in the coming months.
- ͏Higher for longer: A number of US Federal Reserve (Fed) regional presidents have spoken in favor of keeping interest rates on hold at elevated levels for an extended period of time.1 Higher-for-longer US interest rates imply US dollar strength is also likely to be continue. This has negative implications for emerging market assets. Historically, a stronger US dollar has coincided with outflows of portfolio capital from the asset class.
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