Trump's Trade Policies: A Potential Obstacle to Global Growth

Foreks - Citigroup analysts predict that emerging market equities will underperform their global counterparts following Trump's victory in the U.S. presidential election. The bank expects Trump's trade policies to act as a hurdle to global growth, which could lead to a strengthening of the U.S. dollar, putting further pressure on emerging market assets.

Citi, expecting Saudi Arabia and India to be less exposed to trade risks, upgraded Saudi Arabia from underweight to overweight. However, it downgraded India's rating from overweight to neutral, citing a slowdown in earnings growth and foreign investors' selling pressure following recent policy support measures in China.

Citigroup forecasts that India's Nifty 50 index will reach around the 25,000 level by September 2025, representing an approximate 6% increase from its last closing. While upgrading South Africa's rating from neutral to overweight, it pointed to attractive earnings growth and potential tailwinds from China's stimulus measures.

The bank downgraded South Korea's rating to underweight, citing weak corporate earnings growth as a concern. Citigroup also warned that increasing trade policy uncertainty could exert pressure on the Korean economy and harm exports to the U.S. However, it believes that Korea's KOSPI index could reach 2,800 points by mid-2025, indicating a 16% increase from current levels, driven by a rebound in semiconductor earnings and expected momentum from the local central bank.

Citigroup holds a "neutral" rating on emerging market equities and forecasts that the MSCI EM equities index (MSCIEF) will reach the 1,210 level by mid-2025.