However, extending EM outperformance beyond the summer faces a number of challenges. Aside from the potential for tighter global financial conditions and fading optimism on the strength of recoveries in Brazil and Russia, the rebounding growth momentum in China may soon begin to fade. Much of the fear that weighed on EM performance last year was derived from the risk of a sharp economic slowdown, or “hard landing,” in China. After China’s manufacturing PMI in 2015 hit the lowest levels since the 2008-2009 global financial crisis, it rebounded to near the highs of the five-year range. This suggests that the momentum that has lifted EM stocks may soon begin to fade, as you can see in the chart below.

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