China, FXI and MCHI Face Geopolitical Pressure

José Ramos-Horta made the comments Thursday at the Estoril Conference in Portugal, while urging peace talks over Gaza and Ukraine and warning that conflicts far from the Pacific still hit peripheral economies hard. He said when the war in Ukraine began, the price of 25 kilograms of rice in Timor-Leste jumped from $11 to $20 almost overnight.

That is the real investment lesson here. Geopolitics is no longer abstract: it shows up in food inflation, import costs, transport routes and risk premiums. For countries like Timor-Leste, which rely on imports and are exposed to global price shocks, every escalation in Europe or the Middle East is an immediate terms-of-trade hit. For investors, that supports the case for owning assets tied to food security, shipping resilience, energy infrastructure and supply-chain reconfiguration.

The market backdrop remains mixed. China-focused equities, as tracked by FXI and MCHI, have struggled to sustain momentum, while broader emerging-market exposure via EEM has also been choppy. Standard technical indicators on those funds show fading momentum in recent sessions, with price action slipping back toward or below key moving averages. That suggests investors are still demanding a discount for China risk even as policymakers in smaller nations continue to treat Beijing as an indispensable economic partner.

The bigger narrative is that emerging-market diplomacy is being reshaped by cost-of-living pressure. Leaders from the periphery are not choosing sides in the way Washington would prefer; they are trying to preserve trade, keep financing open and avoid imported inflation. That gives China room to remain commercially relevant even as security tensions persist from the South China Sea to Ukraine.

My view is that this is precisely why investors should not confuse geopolitical noise with a structural retreat from China-linked assets. The better trade is not a blind bet on Beijing, but selective exposure to the companies and ETFs that profit from a fragmented world: agricultural exporters, logistics operators, defense suppliers and infrastructure builders. The next catalyst is likely to come from another shock to energy or food prices — and when it does, the market will remember that the farthest economies often feel the pain first.