Citigroup Analysts Predict Emerging Market Stocks Underperform

(Reuters) – Analysts at Citigroup (NYSE:C) anticipate that emerging market stocks will lag behind global peers following Donald Trump's recent victory in the U.S. presidential election, despite China's recent policy initiatives and global economic growth.

The brokerage stated in a note on Thursday that it expects Trump's trade policies to hinder global growth, while the resultant U.S. dollar strength could exert additional pressure on emerging market assets.

Country-Specific Insights

• Saudi Arabia and India: Citigroup anticipates that these countries will be less exposed to trade risks. They upgraded Saudi Arabia to "overweight" from "underweight".
• India: Downgraded to "neutral" from "overweight" due to stagnant earnings growth and foreign investor sell-offs following China's recent policy maneuvers. The forecast for India's Nifty 50 index is to reach 25,000 by September 2025, marking a 6% increase from its last close.
• South Africa: Rating lifted to "overweight" from "neutral", emphasizing attractive profit growth and potential benefits from China's stimulus measures.
• South Korea: Ratings were cut to "underweight" due to declining corporate profit growth. Increased trade policy uncertainty could negatively impact Korea's economy and U.S. export capability. However, the KOSPI index is forecasted to reach 2,800 points by mid-2025, reflecting a 16% increase from current levels, supported by anticipated semiconductor earnings recovery and interest rate cuts by the local central bank.

Overall Market Outlook

Broadly, Citigroup holds a "neutral" rating on emerging markets stocks and projects the MSCI EM equities index to reach 1,210 points by mid-2025, suggesting around a 10% upside from present levels.