Emerging markets give a clear sign of strength by having a general increase in their prices for the sixth consecutive day.
“Emerging markets” are called developing economies that are experiencing rapid growth and industrial expansion, although they still have lower levels of infrastructure and financial stability than those of developed markets.
In the stock market world, “emerging markets” refers to stock markets and financial assets from countries with economies in transition that offer greater risks, but also the potential for high returns for investors.
The growth trend for this type of markets is being fueled by the Chinese government’s promises to implement a new economic stimulus package that would include a reduction in interest rates and a capital injection (something similar to what was done during the pandemic 2020).
Although these are measures to try to correct potentially critical situationsinvestors in volatile assets (including Bitcoin) could benefit.
The MSCI index of emerging market stocks, widely used by analysts and large investors to evaluate the performance of developing economies, has shown significant growth, as seen in the following graph taken from the Bloomberg portal.
MSCI index of emerging market stocks. Source: Bloomberg.
Technology companies in Hong Kong and South Korea, as indicated by Bloomberg, have been mainly responsible for these gains. In addition, the yuan and South Korean won rose after the Chinese government announced substantial economic measures.
Let us remember that, as CriptoNoticias has reported, China, in addition to promising interest rate reductions of the yuan has effected sale of US Treasury bonds worth $142 billion.
Unlike Western countries, which struggle with inflation, China seeks to counter deflation and stimulate annual economic growth of approximately 5%.
A plan to boost the Chinese economy
Chinese President Xi Jinping has mobilized officials to prioritize economic revival, calling for support for the private sector and ensuring that local leaders can act decisively without fear of mistakes.
At a Politburo meeting, the promise to provide sufficient fiscal spending, measures to stabilize the real estate sector and aggressive cuts in interest rates was reiterated, the Hong Kong newspaper South China Morning Post.
This movement has brought with it a notable revitalization, not only of emerging markets, but also of Chinese markets. The Shanghai Composite Index, which measures the performance of stocks on mainland China’s largest stock exchange, has seen its biggest weekly gain since 2008as detailed in the following graph.
Shanghai Composite Index. Source: Investing.
This reflects the immediate success of the government’s economic decisions.
Wall Street giants join the trend
Billionaire David Tepper, founder of Appaloosa Management, has doubled his investment in chinese assets after the stimulus measures.
According to Tepper, These policies exceeded all his expectations, and led him to increase his participation in technological giants such as Alibaba and Baidu..
“I thought what the Federal Reserve did last week would lead China to ease, but I didn’t expect them to bring out the big guns,” he said in an interview with CNBC.
Your hedge fund now had started acquiring Chinese stocks at the beginning of the yearbut recent measures led him to redouble his bet, further strengthening investor confidence in emerging markets.
What does this mean for bitcoin?
The appetite for denominated assets “risky”like bitcoin has grown in parallel with the rebound in emerging markets.
Juan León, director of investment strategy at the Bitwise firm, explained that expansionary policies such as those adopted by China tend to inject liquidity into the global economy. This excess capital, in search of higher returns, is usually directed towards alternative assets, and bitcoin is among the main beneficiaries.
With Chinese stimulus underway, bitcoin has already reached $66,500, a price not seen since July 31as seen in the following graph of TradingView. Although it remains 9% below its March all-time high, the bullish momentum is evident.
BTC price since the beginning of August. Source: TradingView.
For León, the current Chinese macroeconomic environment – with low rates, fiscal stimuli and increasing debt – It is perfect for bitcoin and other cryptocurrencies to experience explosive growth.
The relationship between expansionary policies and the growth of bitcoin is clear. The increase in demand for the digital currency, without a proportional increase in its supply (which is limited to a maximum of 21 million of units), could lead to new highs in its price in the coming months. Everything indicates that, as China continues on its path of economic stimulus, digital assets like bitcoin will continue to be an attractive haven for global investors.
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