Coronavirus: China tightens grip on emerging-markets via index weights

The coronavirus pandemic is helping China dominate the emerging-market (EM) landscape, making a quick recovery in the world’s second-largest economy crucial if the asset class is to rebound.

China’s share in MSCI’s index of developing-nation stocks rose 6 percentage points in the past quarter to a record 36.5 per cent. The country’s weighting in a Bloomberg Barclays gauge of local-currency debt has increased to 35.7 per cent, also an all-time high. 

Chinese stocks and bonds were the best performers in both measures in the period.

This enhanced presence comes at a crucial time for Chinese markets. While authorities have unlocked a raft of stimulus measures, investors are concerned China lags developed nations in terms of the magnitude of its support. Global money managers may wait for signs these steps are reviving the economy beforereturning to developing-nation assets.

The jump in China’s share in the stocks gauge came at a cost for its BRICS peers — Brazil, Russia, India, and South Africa — where the pandemic is still in its early stages and the economic impact is unknown.