MSCI Emerging Markets & FTSE 250 Show Diverging Paths as Capital Revisits Value

Two major equity benchmarks are moving in different lanes: the MSCI Emerging Markets Index (EM) is gaining strong momentum, while the FTSE 250 Index a leading UK mid cap benchmark is showing relatively modest performance.

The divergence reflects shifting flows from developed-market growth into cheaper, higher growth segments.

Emerging Markets Gaining Traction

• According to Hermes research, the MSCI EM Index is up approximately 25.1% year to date in 2025, out pacing developed market indexes.

• The iShares version of the index shows a YTD return of around 32% as of mid November 2025, implying robust investor interest.

• Analysts link the rally to cheaper valuations, earlier monetary easing in EM, and structural themes such as near shoring and AI hardware exposure.

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FTSE 250 Lagging but Not Dead

• The FTSE 250 has risen about 7% 8% YTD in 2025, indicating moderate performance compared with its global peers.

• The UK mid-cap market is constrained by defensive sector bias (utilities, consumer staples) and relative lack of high growth tech exposure.

• Some investors view the FTSE 250 as undervalued, but the momentum isn’t aligning with higher growth benchmarks.

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What’s Driving the Divergence

• Valuation gap: Emerging markets started the year cheaper, offering more upside than developed markets overpriced stocks.

• Growth premium: Many EM economies are growing faster, and their exports benefit from global supply chain reorientation.

• Flow dynamics: European and UK markets face headwinds from investor reallocation toward regions seen as growth leaders.

• Sector composition: FTSE 250’s heavy weighting in more stable, lower growth industries contrasts with EM’s exposure to tech, industrial expansion and consumer growth.

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Investor Implications

• If global capital continues to seek growth over stability, EM exposure appears more compelling.

• But with EM, risks are real: currency swings, geopolitics and policy divergence could reverse sentiment quickly.

• For UK equities (FTSE 250), potential remains especially for value, dividend and domestic-oriented companies but the risk/reward is arguably less exciting right now.

The story isn’t just “global stocks up” it’s where the up is happening.

The MSCI Emerging Markets index is clearly running ahead, while the FTSE 250 is lagging and requires a catalyst to close the gap.

For investors, the message is clear, region and sector choice matter more than ever.