Legendary investors and Goldman Sachs unanimously agree: the Chinese stock market will boost emerging market stocks

Legendary American investor Mark Mobius and Goldman Sachs strategists have stated that emerging market stocks will be boosted by China's stimulus measures, as China holds a significant weight in various indices and has close economic ties with other developing countries.

China accounts for a quarter of the MSCI Emerging Markets Index, meaning that when the Chinese market rises, the index will also rise. The combination of Chinese stimulus measures and the Fed rate cut has already driven emerging market stocks up by 10% from mid-September lows.

Goldman Sachs strategists, including Kamakshya Trivedi, wrote in an email that China's loose monetary policy has expanded the rally in emerging market stocks, driven by the significant rise in the top-weighted Chinese stocks. These stocks have risen nearly 40% from their lows, and in the past three weeks, China's stock market has outperformed other emerging markets to the highest level in the past 25 years.

They expect emerging market stocks to further rise, and China's growth will have spill-over effects on countries like South Korea, Malaysia, and South Africa.

Goldman Sachs has upgraded its rating on Chinese stocks to "overweight" in its Asian strategy.

Mark Mobius, Chairman of the Mobius Emerging Opportunities Fund, known as the "Emerging Markets Father," believes that Chinese authorities will try to intensify market stimulus efforts as they seek foreign capital inflows. In an interview, he said, "The Chinese want to see the market much better than it is now. Of course, there will be corrections along the way."

Mobius stated that about half of emerging market investors may be tracking the MSCI Emerging Markets Index, and due to the significant weight of Chinese stocks, this means they are also allocating additional funds to the Chinese market.

"As more and more people join, this will be an accelerating process," he said. Considering India as the second-largest weight in the emerging market index, emerging market stocks are expected to outperform U.S. stocks.

Mobius mentioned that the situation is changing now. With funds flowing in, the total pool of funds flowing into emerging markets will expand. You will see the trend of the entire market (completely change)