India among top picks as JP Morgan turns bullish on emerging markets

New Delhi : American investment banking firm JP Morgan has turned bullish on emerging market (EM) equities and includes India among its top picks along with Philippines, Brazil, Chile, Greece, Poland, and UAE.

"We upgraded our EM vs DM stance from underweight (UW) to Neutral, and we now move it further up, to overweight (OW)", said the JP Morgan report.

The report says emerging markets had four years of weak performance versus the developed markets (DM), lagging cumulatively by 40 per cent since 2021.

"Within EM, our EM strategy team continues to prefer markets with higher domestic exposures (India, Philippines, Brazil, Greece, Poland, and UAE) and strong bottom-up idiosyncratic catalysts (Chile and Korea)," added the report.

The report added, this year EMs have traded better than DMs. "So far this year, EM are trading somewhat better, up mid-single digit vs DM, and up 2% relative ytd ex China. We upgraded EM to Neutral versus DM in March, and now take a step further, upgrading EM to outright OW versus DM," said the report.

Within EM, Chinese equities were the worst hit during the post-Liberation Day, and were down 13 per cent in less than a week. Chinese equities, however, recovered most of the losses post its 90-day temporary trade deal with the US. The US lowered tariffs on imports from China to 30 per cent from 145 per cent, while China reduced tariffs on US goods to 10 per cent from 125 per cent, for a duration of 90 days.

But JP Morgan believes that 90 days is not enough to negotiate the trade deal between the US and China, and post 90 days if the US adopts aggressive stance EM equities will trade better.

"We recognize that 90 days may not be enough for the China and China to deliver a trade agreement, and the tariffs noise is unlikely to go away, but we do not expect the US to again adopt an aggressive trade stance towards China, which could allow EM equities to trade better." said the report.

On sectoral performances, the report said historically, the Mining sector performs well during periods when EM outperformed DM. The mining sector could find additional support from potential EM equity outperformance.

"We reiterate our double upgrade of Mining sector that we did in March, after years of cautious stance." said the report.