Xi, Putin Meet in Beijing as China Flexes Diplomatic Clout | Insight with Haslinda Amin 9/2/2025

Recent global market and geopolitical developments present a mixed picture: Chinese tech giants are notably outpacing the Nasdaq 100, while Indonesian markets have tumbled amid domestic unrest. Concurrently, India's economy is projected to take a significant hit from US tariff policies, even as Prime Minister Modi aligns with China and its closest allies at the SCO Summit.

Analysis

A significant performance divergence is evident across key emerging markets, creating distinct alpha opportunities and risks. Chinese technology giants are currently outperforming the US-based Nasdaq 100, signaling a potential shift in market leadership and relative value. In stark contrast, Indonesian markets are experiencing a sharp downturn, tumbling amidst domestic protests and looting, which introduces significant event-driven risk and dampens regional sentiment. Concurrently, India's economy faces a substantial threat from projected US tariff policies, a macro headwind that is materializing as Prime Minister Modi engages with China and its allies at the SCO Summit. This geopolitical alignment could signal a strategic pivot in response to US trade pressure, further complicating the investment landscape for India. The overall environment, reflected by the moderately negative sentiment, is characterized by fragmentation where country-specific factors—from sector strength in China to political instability in Indonesia and trade-war impacts on India—are the primary drivers of returns, demanding a granular approach over a broad-based EM allocation.

Key Decisions for Investors

• Investors could explore a relative value strategy, favoring Chinese technology equities over the Nasdaq 100, to capitalize on the reported outperformance.
• It is prudent to reduce or hedge exposure to Indonesian assets, as domestic unrest presents a significant and immediate downside risk to the market.
• Re-evaluate Indian equity and currency exposure given the significant economic threat from US tariffs, while monitoring outcomes from the SCO Summit for signs of shifting long-term trade alliances.
• A broad emerging markets strategy is ill-advised; instead, focus capital on specific countries and sectors demonstrating relative strength, such as Chinese tech, while avoiding those with clear political or economic headwinds.