Emerging markets: Performance since Brexit vote
Emerging markets were the biggest gainers during the one-year period after the Brexit vote in June 2016. The iShares MSCI Emerging Markets (EEM), which tracks the performance of emerging markets (VWO), returned nearly 21.3% between June 23, 2016, and June 23, 2017.
In the first part of this series, we saw that many developed nations and emerging markets have performed well during the past year. The day after the Brexit vote, on June 24, 2016, major emerging market indexes had negative performances. The United Kingdom has a sizable trade relationship with many emerging economies. Weaker growth in the United Kingdom could hamper those trade relations.
There are specific reasons behind the performances of various emerging economies. India (INDA) and China (FXI) make up a higher percentage of EEM. Economic reforms by the Indian government and improvements in the manufacturing and automobile sectors are the main drivers of this index. The Indian Parliament’s recent passage of the GST (goods and service tax) bill could be a major growth driver for India’s economy. Reforms across other emerging nations such as Argentina (ARGT), Peru (EPU), and Chile (ECH) are important factors behind their performances. The falling dollar index also supported the movement of emerging markets. Most of the time, the dollar index and emerging markets are negatively correlated.
In the next part of this series, we’ll take a look at the United Kingdom’s economic growth in the last year.