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The world witnessed an economic rollercoaster in 2023. In the first half of the year, despite the looming fear of recession, global equity market investment across all essential and non-essential sectors finally came back to life after the pandemic was officially declared over. China’s reopening led to the long-awaited consumption push in the emerging economy. Further, aggressive fiscal stimulus and relief measures across several nations to boost economic growth provided an impetus to the worldwide investment scenario.Unfortunately, as the year went by, the investment scenario gradually became difficult, affected by growing geopolitical complications and an energy crisis resulting in a heightened inflationary situation. This caused a substantial slowdown of economic growth across various parts of the globe. Within the emerging markets, the situation became all the more difficult, with China, the second-largest economy in the world, facing an extensive debt crisis due to a real estate bubble.Despite all these, the latest economic roadmap of the Organization for Economic Cooperation and Development (OECD) clearly points to a gradual easing of overall economic conditions in the emerging market compared with the global trend. This can significantly motivate market players about a bull run in the emerging markets in the coming months.As 2023 draws to a close, let’s take a closer look at how the emerging market scenario has been so far this year and how it is likely to be in 2024. Here, we present three emerging market stocks, PDD Holdings Inc. ( – ), MercadoLibre ( – ), and Nu Holdings Ltd. ( – ), which are expected to demonstrate a strong rally in 2024.
Likely Growth Trend of the Emerging Nations in 2024
In its latest report, the OECD provided a brighter forecast for the emerging economy compared to the developed nations. In the face of weakening global trade and continued supply chain hazards, combined with tightened monetary policy, global growth is expected to reach 2.9% in 2023. However, it is expected to weaken to 2.7% in 2024. Yet, this global growth is expected to remain highly dependent on the fast-growing Asian economies in 2024.Despite China’s economy stumbling in several months of 2023, the MSCI Emerging Markets Index has displayed more than 4% growth so far in 2023. This is a sign of revival. A Lazard in this regard noted that China finally started to demonstrate an uptick in investor interest, primarily on the back of policy support announcements from the central government. Assuming no further exogenous shock, we expect China to demonstrate an improving growth trend in 2024.India’s real GDP growth in fiscal 2022-23 is estimated to be a robust 7.2%. IMF, in its December 2023 report, noted that the employment level exceeded the pre-pandemic level. While the informal sector continues to dominate, formalization has progressed. The financial sector has been resilient— the strongest in several years — and largely unaffected by global financial stress in early 2023. In spite of macroeconomic and financial stability, in fiscal 2023-24, real GDP is expected to slow down a bit to 6.3%. Inflation is expected to ease, leading to improving consumption trends. Further, surging services exports and public investment will continue to drive the economy. Yet, per OECD, growth is expected to be dented by weather-related events and a weakening international outlook.The economic growth pace in Indonesia remained solid through 2023 despite several macroeconomic debacles. Unlike India and China, the OECD reported an improving rate of growth in 2024 for this nation. Per the report, real GDP growth is estimated to be 4.9% in 2023 and is projected to rise to 5.2% in 2024. Household consumption, despite modest real wage gains, continues to be the major driving engine of the economy. Although monetary tightening and slowing global trade will weigh on fixed capital formation, two years of monetary tightening have pushed down inflation, which is projected to be around 2.5% in 2024.Meanwhile, despite the global economic slowdown, Brazil is expected to report 3% growth in real GDP for 2023, banking on a stronger-than-expected agriculture harvest and robust household consumption. With the easing of global inflation in the coming months, as well as an increase in foreign direct investment as the supply chain issue gets resolved, this nation is expected to demonstrate strong economic growth in 2024.In South Africa, another significant emerging economy, the situation has been quite difficult, thanks to continued unemployment and spending pressure. The current global economic downturn might have worsened the situation further. Per the OECD, GDP growth is projected to slow down to 0.7% in 2023 before increasing by 1% in 2024. Net exports will dent growth as most machinery and equipment are imported and external demand has weakened. Private consumption growth will ease amid still-high inflation and lower household purchasing power.
Our Choices
Given the chances of potential recovery, 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.PDD Holdings is a Chinese online retailer with a primary focus on the traditional agriculture industry. The company is currently investing decisively in high-growth areas such as agritech, supply chain technology and core R&D capabilities. As part of PDD Holdings’ “high-quality development” strategy, it has increased investment in technology and further deepened user mindshare in the third quarter.PDD sports a Zacks Rank #1 (Strong Buy) currently. Its 2024 sales and earnings growth rates are pegged at 38.6% and 22.2%, respectively. Year to date, the stock has risen 79.9% compared with the industry’s 54% rise.
PDD Holdings Inc. Price
| MercadoLibre operates online commerce platforms in Latin America. It operates Mercado Libre Marketplace, an automated online commerce platform; and Mercado Pago FinTech platform, a financial technology solution platform.The company is present in 18 countries, including Argentina, Brazil, Mexico, Colombia, Chile and Peru.The company recently reached an important milestone with the relaunch of its loyalty program as MELI+.MELI carries a Zacks Rank #2 (Buy). Its 2024 sales and earnings growth rates are pegged at 21.9% and 52.5%, respectively. Year to date, the stock has surged 88.8% compared with 54% rise of the industry.
MercadoLibre, Inc. Price
| Nu Holdings provides digital banking platform and digital financial services in Brazil, Mexico, Colombia, and internationally. Nu is currently on a robust upward trajectory, demonstrating solid operating performance, continued growth and increasing profitability.This Zacks Rank #2 stock holds significant prospects for 2024 with sales and earnings growth projected to be 39.9% and 88.6% respectively. Year to date, the stock has surged 102.2% compared with 46.3% rise of the industry.
Nu Holdings Ltd. Price
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