Emerging markets stock index enters correction territory

A closely followed gauge of emerging market equities has tipped into correction territory, culminating in uncertainty over US trade policy and concerns about the outlook for Chinese economic growth.

The MSCI EM index closed down 0.4 percent on Thursday at a four-month low of 1,066.47. It took the gauge’s drop since hitting a nearly 20-month high of 10 percent in October, the threshold for a correction.

Emerging market stocks came under pressure in the last quarter of 2024 as Donald Trump won the US presidential election and traders fretted about the adverse impact his proposed tariffs and other policies could have on the country’s trading partners.

Chinese stocks have sold off in recent months not only because of the potential impact of U.S. tariffs but also because Beijing’s economic stimulus package fell short of investors’ expectations. At more than 27 percent, Chinese equities represent the largest single country weighting in the MSCI EM index