Most Emerging Market Indices Overshadowed their DM Rivals in July

MSCI's index of emerging market stocks (MSCI EM) rose about 4.6% in July, posting its best performance since January and reclaiming its June 2022 high. July was also the first month since January for the MSCI EM to outperform the MSCI World Index of developed equity markets (by around 2.4%). Emerging market debt also performed well, with premiums over U.S. Treasuries (EMBI) falling to 15-month lows as emerging market currencies were mixed.

The MSCI Emerging Markets Currency Index weighted by market capitalization was up about 1.7% in July and 2.6% year-to-date. However, some nuance is missing from these general metrics. So far this year, Latin American currencies have been in the top three emerging markets (Colombia, Mexico and Brazil), but the Colombian peso was the only Latin American currency in the top four in July. We wrote about the stellar performance of Mexican peso in the Currencies section some time ago. Conversely, the Argentine peso and Turkish lira, along with Russian ruble – now excluded from the index – were the weakest performers in July and remained the worst performers so far this year.

Having said that, The JP Morgan Emerging Market Currency Index was practically unchanged in July after falling all months in Q2 2023. It is off about 1.4% year-to-date.