Emerging markets stock index enters correction territory

A closely followed gauge of emerging markets equities tipped into correction territory, the culmination of uncertainty over US trade policies and concerns about the outlook for Chinese economic growth.

The MSCI EM index closed 0.4 per cent lower on Thursday at a four-month low of 1,066.47. That took the gauge’s drop since October’s almost 20-month high beyond 10 per cent, the threshold for a correction.

Emerging markets stocks came under pressure in the final quarter of 2024 as Donald Trump won the US presidential election and traders fretted about the adverse effect his proposed tariffs and other policies could have on the country’s trading partners.

Chinese stocks have sold off in recent months not only due to the potential impact of US tariffs but also because Beijing’s economic stimulus package fell short of investor expectations. At more than 27 per cent, Chinese equities represent the largest single country weighting in the MSCI EM index.