Market Viewpoint

David Dali, Head of Portfolio Strategy, provides his 12-month outlook for global equity markets.

Outperformance Beckons in an Easing Environment

Persistent tightening of U.S. and European monetary policy is contrasting with early stage loosening in emerging markets (EM). This easing, combined with positive policy actions in China, has strengthened my conviction that Asian and EM equity allocations may outperform in coming quarters.



The economic and market forecasts presented herein have been generated by Matthews Asia and provided for informational purposes only. Forecasts are based on proprietary models and there can be no assurance or guarantee that the forecasts can or will be achieved.

Emerging Markets

  • Emerging markets (EM) have been held back as China’s weak post-COVID recovery has weighed on sentiment. I expect this to change, however, as China begins to make policy moves to address its economic challenges. In addition, returns from EM excluding China have kept up with developed international markets this year, and going forward, their diverse characteristics could buffer their economies against constrained liquidity conditions in developed markets.
  • Regionally, I’ve upgraded my view of Latin America from underweight to neutral as tight monetary policy has helped strengthen currencies and created room for policy easing.
  • I’m more positive on Asia ex Japan where I remain overweight. China’s challenges are fading and recovering domestic demand should support imports from Korea, Taiwan and Association of Southeast Asian Nations (ASEAN) countries, helping offset a policy-induced slowing in the global economy.
  • Among single countries, China remains an overweight as the government has finally begun to make policy moves to address the current crisis of confidence. Recent policy announcements include support of platform companies (which should have a positive impact on employment, especially for college graduates), more tax incentives and easing household credit, property developer loan relief, and relaxing of overseas borrowing restrictions to stabilize the Chinese currency. Lastly, although geopolitical tensions will remain, recent visits to China by Antony Blinken, Janet Yellen and John Kerry show a willingness from both sides to engage.
  • In India, economic growth remains solid and early tightening of monetary policy has tempered inflation to create an almost Goldilocks scenario. While India seems poised to perform well against regional peers I’m keeping my neutral view. Inflationary risks remain which could force the central bank into another round of rate increases not priced into already elevated valuations.

Developed Markets

  • Japan’s market is enjoying a trifecta of support including a return to reflationary GDP growth, government and activist-induced pressure on undervalued companies to increase their payout and buy-back ratios, and a surprise widening of the 10-year yield curve control (YCC) band which keeps monetary policy very accommodative while adding support to the Japanese yen.
  • The U.S. is showing incredible resiliency to rising rates and tighter credit. However, economic strength can lead to uncertainty around Federal Reserve policy and may bring additional rate hikes into play. I expect a more difficult earnings environment in the next 12 months amid lofty valuations.
  • I’ve downgraded my view on developed international investments, with the exception of Japan, to underweight from neutral, due to tightening financial conditions and lower earnings-growth consensus. Additional headwinds include continued volatility in energy prices and the impact of the war in Ukraine.

David Dali is Head of Portfolio Strategy at Matthews. David serves as a macro thought leader and as a proxy for portfolio managers, providing insights and analytics to clients. He has spent much of his career allocating and investing in equities, fixed income, currencies and derivatives.


Emerging Markets is based on the MSCI Emerging Markets Index, which captures large and mid cap representation across 24 Emerging Markets countries. Constituents include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.

Emerging Markets Latin America is based on the MSCI Emerging Markets Latin America Index, which captures large and mid cap representation across five Emerging Markets countries in Latin America, including Brazil, Chile, Colombia, Mexico, and Peru.

Asia ex Japan is based on the MSCI AC Asia ex Japan Index, which captures large and mid cap representation across two of three Developed Markets (DM) countries, excluding Japan, and eight Emerging Markets (EM) countries in Asia. DM countries include: Hong Kong and Singapore. EM countries include: China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand.

China is based on the MSCI China Index, which captures large and mid cap representation across China A shares, H shares, B shares, Red chips, P chips and foreign listings (e.g. ADRs). 

India is based on the MSCI India index, which is designed to measure the performance of the large and mid cap segments of the Indian market.

Japan is based on the MSCI Japan index, which is designed to measure the performance of the large and mid cap segments of the Japanese market.

U.S. is based on the MSCI USA index, which is designed to measure the performance of the large and mid cap segments of the U.S. market.

International is based on the MSCI World ex USA index, which captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries-- excluding the U.S. DM countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the U.K.



The views and information discussed in this report are as of the date of publication, are subject to change and may not reflect current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. Investment involves risk. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies. Past performance is no guarantee of future results. The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.