The first half of 2024 was favorable for emerging market investment. Investors increased their exposure in this market despite China’s property crisis and the poor consumption patterns of several emerging geographies. The extremely tightened monetary policy of the United States made investors think that the central banks of the emerging economies would tame their interest rates ahead of the Fed to control their financial instabilities.
Accordingly, the first half of 2024 experienced a significant rally, with January to August 2024 registering a 9.6% return for emerging-market equities (data by RBC Global Asset Management). This was particularly driven by the staggering performances of the large-cap semiconductor companies.
Unfortunately, this positive trend did not last long through the next few months of the year, thanks to the uproar surrounding the U.S. election and the looming fear of high import tariff impositions. While growing Sino-U.S. complications concerned investors, emerging market investment activities were also muted because of India’s election results, as the ruling party’s winning stake was largely challenged this time. Added to this, the Fed’s two successive rate cuts and the probability of further easing of monetary policy going forward might have played a big role in influencing investors to pull their fund out of the emerging markets.
Despite a period of high uncertainty, the latest economic roadmap of the Organization for Economic Cooperation and Development (OECD) has been quite enchanting in favor of the emerging market’s 2025 prospects. OECD noted that despite all geopolitical tensions and economic uncertainty, the emerging market’s overall momentum in 2024 was on par with 2023. And with inflation declining in most countries and capital flows to emerging market economies increasing, it is the ideal time to encourage more private investment to boost economic and social development.
As 2024 draws to a close, we take a closer look at the prospects of emerging markets in 2025. Here, we present three emerging market stocks, Qifu Technology, Inc. QFIN, Yatra Online YTRA and Dr. Reddy’s Laboratories RDY, which are expected to gain enormously in 2025, capitalizing on their growth prospects.
How Things Are Shaping Up in Terms of FDIs & Monetary Policies?
Real GDP Growth Projections (in %) for 2023-2025 Image Source: OECD: 2024
The above table shows that majority of the emerging economies, despite their 2024 setback mostly stemming from high geopolitical risks, coupled with the tightening of monetary policy, are expected to experience a turnaround in 2025.
OECD’s economic outlook in this regard also depicted brighter prospects of foreign direct investment (FDI) inflows in 2025 for India and China. Per the report, the outlook for FDI is expected to remain resilient in Emerging Asia, as the region attracts investments from a diversified group of countries due to competitive wages, increasing domestic demand driven by population growth, and improvements in business regulations and infrastructure. There is a high chance that the region will experience an FDI recovery in 2025, primarily banking on manufacturing investments.
The FDI Intelligence report of December 2024 also expects global headline FDI to recover in 2025 from the low levels of the past three years. As per the report, despite international trade-related complications, world trade in goods and services is growing. It expanded by 0.8% in 2023 and 3.1% in 2024, and the IMF expects it to accelerate at 3.4% in 2025. Further, following three consecutive years of peak inflation, the IMF’s 2025 headline inflation projection for 2025 stands at 3.5%, below 2000-2019’s average level of 3.6%. Accordingly, 2025 has a pretty high chance of experiencing monetary policy easing outs in several emerging economies.
Our Choices
Given the chances of potential recovery in 2025, adding stocks from emerging countries is a prudent step. We have narrowed our search to the following three stocks based on a favorable Zacks Rank and solid metrics for the upcoming period.
Qifu: It is a leading Credit-Tech platform in China that provides a comprehensive suite of technology services to assist financial institutions and consumers and SMEs in the loan lifecycle, ranging from borrower acquisition, preliminary credit assessment, fund matching and post-facilitation services.
QFIN sports a Zacks Rank #1 (Strong Buy) currently. Its 2024 and 2025 earnings growth rates are pegged at 55.2% and 12%, respectively. Over the past six months, the stock has risen 87% compared with the industry’s 50.9% rise. You can see the complete list of today’s Zacks #1 Rank stocks here.
Qifu Technology, Inc. Price
Qifu Technology, Inc. Price
Qifu Technology, Inc. price | Qifu Technology, Inc. Quote
Yatra: This online travel and tourism operator of India provides information, pricing, availability and booking facilities for domestic and international air travel, domestic and international hotel bookings, and holiday packages among others. The company sees significant opportunity within its existing customer base. With Global India's expertise, YTRA expects the MICE (Meetings, Incentives, Conferences, and Exhibitions) sector to grow at a double-digit rate, potentially 20-25% annually over the next 2-3 years.
Yatra too sports a Zacks Rank #1 currently. Its fiscal 2025 revenue and earnings growth rates are pegged at 90.9% and 350%, respectively. Over the past six months, the stock has risen 24.3% compared with the industry’s 11.4% rise.
Yatra Online, Inc. Price
Yatra Online, Inc. Price
Yatra Online, Inc. price | Yatra Online, Inc. Quote
Dr. Reddy’s: India-based Dr. Reddy’s is an integrated global pharmaceutical company that markets its products in countries like the United States, United Kingdom, Germany, India, Russia, Venezuela, Romania and South Africa. Dr. Reddy’s enjoys a strong position in the generics market. Dr. Reddy’s is working with Merck Serono to develop and commercialize a portfolio of biosimilar compounds in oncology, primarily focused on MAbs. Dr. Reddy’s has already expanded its biosimilars facility in India to meet growing demand in emerging markets.
RDY holds a Zacks Rank #2 (Buy). Its fiscal 2025 revenue and earnings growth rates are pegged at 11.5% and 3.8%, respectively. Over the past year, the stock has gained 7.9% compared with the industry’s 20.9% rise.
Dr. Reddy's Laboratories Ltd Price
Dr. Reddy's Laboratories Ltd Price
Dr. Reddy's Laboratories Ltd price | Dr. Reddy's Laboratories Ltd Quote
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