War in the Middle East, energy market uncertainty and persistent geopolitical tensions might once have rattled emerging markets (EM). Yet in 2026, the asset class has shown surprising resilience.
So, what’s changed? In our latest issue of Wealth DFM Magazine, we asked leading EM investors where they are currently finding the most compelling opportunities and why today’s EM investment case may be more nuanced, differentiated and resilient than many investors assume.
Looking beyond the macro narrative
Ernest Yeung, Portfolio Manager of T. Rowe Price’s EM Discovery Equity strategy, says:
“For much of the past decade, EMs have often traded as a macro story. But today, the opportunity set across EMs is becoming far more differentiated. Country, sector, and company-level dispersion has widened significantly, creating a stronger backdrop for active investors focused on fundamentals rather than benchmark exposure alone.
“Improving tourism activity and attractive valuations in parts of Southeast Asia are beginning to create opportunities in areas that remain under-owned by global investors. In other parts of the market, elevated valuations and crowded positioning have increased the importance of selectivity and disciplined risk-taking.
“EMs today look very different from prior cycles, with healthier macro fundamentals, more disciplined policy frameworks, and stronger corporate balance sheets than investors often assume.
“Periods of uncertainty can also create valuation dislocations and mispriced opportunities for long-term investors willing to look beyond short-term sentiment. Valuation discipline is becoming increasingly important. Several higher-growth areas of the market have become more crowded, while a number of overlooked businesses continue to trade at attractive valuations despite improving earnings potential and stronger balance sheets.
“We believe this environment is creating opportunities in what we would describe as ‘forgotten’ stocks, companies that may sit outside the market’s primary focus but are benefiting from improving fundamentals, stronger cash flows, operational execution, and re-rating potential.”
Why selectivity matters in EM debt
Todd Howard, Portfolio Manager of the Nordea 1 – EM Bond Fund, says:
“EM sovereign debt levels remain materially lower than those of Developed Markets (DMs), and EM economies are projected to grow at a significant premium to DM this year. Also, the EM sovereign credit upgrade cycle remains firmly intact, with upgrade-to-downgrade ratios at multi-year highs and the vast majority of EMBI index countries carrying stable or improving outlooks.
“The pipeline of potential Rising Stars (sovereigns on the cusp of investment grade) continues to offer compelling idiosyncratic alpha for disciplined bond selectors. In addition, EM sovereign yields remain near historical highs, offering substantial income and a meaningful buffer against further spread widening.
“As DM yields trend lower on weaker growth, EMD’s structural yield premium becomes increasingly pronounced. Current valuations reward patient, fundamentals-driven investors with the conviction to look through short-term volatility.
“The investment landscape for the remainder of 2026 is demanding. and precisely the kind of environment where resilient alpha is made. Energy-driven dislocations, political transition risks, and diverging credit dynamics across EM sovereigns do not reward passive exposure.
“They reward experience, research depth, and portfolio flexibility to act with conviction when others hesitate. This is where active management demonstrates its true value: distinguishing noise from signal, separating structural opportunity from tactical risk, and capturing dislocations that the market misprices in moments of uncertainty.”
Diversification beyond the AI winners
Gabriel Sacks, Lead Manager of Aberdeen Asia Focus and Investment Director on Aberdeen’s Global EM equities team, says:
“The first thing to note is that the EM arena is vast and encompasses a range of very different countries, companies and sectors. That alone can make it attractive from a diversification point of view.
“EMs now represent well over 50% of all global growth. Many have quite orthodox monetary policies and much lower debt levels than their developed counterparts. The macro picture and the picture at the company level is encouraging. Many businesses are in good shape, and valuations are often considerably cheaper than in DMs, particularly versus the US.
“Against this backdrop, there are some especially interesting opportunities in commodities, manufacturing and the AI supply chain, the last of which has really been flying recently. Investors have become familiar with the issue of concentration in DMs in recent years, with a handful of stocks responsible for an outsized percentage of overall performance.
“EMs aren’t immune from this phenomenon. As with the Magnificent Seven in the US, a small number of Asian technology stocks linked to the AI boom are increasingly dominating the EM landscape. There’s clearly something to be said for holding these companies. One of which, Hynix, recently achieved a trillion-dollar market valuation. We hold many of them in several of our own EM funds.
“Investors need to be aware of concentration risk and not put too many of their eggs in one basket. Particularly in a region like Asia, EM smaller companies can offer both diversification and growth.”
China’s changing investment story
Raheel Altaf, Fund Manager across several Artemis SmartGARP funds, says:
“Our process is designed to identify value and momentum around the world dispassionately. The standout region within EMs is China, where we’re seeing three areas of strength.
“First, commodities. China has a wealth of rare earth minerals. They’ve got healthy balance sheets, and demand is strong. We hold CMOC and China Hongqiao, the world’s largest cobalt and aluminium producers respectively, and Western Mining, which specialises in rare earths.
“Second, financials and infrastructure plays – companies with strong balance sheets and high yields. Share buybacks are boosting yields and highlighting shareholder reform. We hold, for example, Industrial and Commercial Bank of China and International Capital Corp.
“Third, consumption recovery stocks. Inflation has picked up, and that’s encouraging Chinese citizens to spend rather than save. We’ve sold holdings like Alibaba and Tencent, because they’ve moved away from returning cash to shareholders to join the AI arms race, but there are other options, such as Midea Group and JD.com.
“I was in China recently and was blown away by the rate of progress, the energy of the place and the quality of technology and manufacturing. It has to be a big part of portfolios.”
The AI infrastructure opportunity and the dollar question
Raj Manon, Head of Investments – Multi-Asset, at Marlborough, says:
“The most compelling opportunities in EMs remain centred on the AI infrastructure build-out, with South Korea and Taiwan the standouts. Both markets continue to offer the potential for attractive earnings growth. Consensus earnings-per-share growth forecasts for Korean memory chip and Taiwanese semiconductor companies remain in the range of 30-50% over the next 12 months, driven by insatiable demand for increasingly powerful chips.
“Beyond the pure-play names, carefully selected proxy beneficiaries can add diversification while maintaining AI exposure. Going forward, we believe the trajectory of the US dollar will be vital. Historically, a weaker dollar has been the single most powerful tailwind for EM equities.
“It eases financial conditions, supports commodity exporters, reduces debt servicing pressures and attracts capital flows into the asset class. With the Fed increasingly constrained and the dollar looking overvalued on a real exchange rate basis, we believe currency dynamics will be the key swing factor for EM returns. Our view is that it’s sensible to have meaningful, diversified EM exposure rather than waiting for perfect clarity about these currency dynamics. Dollar weakness, if sustained, may move quickly, and this would be likely to reward those already positioned.”
A weakening dollar and turbulence in the Americas
Darius McDermott, Managing Director at Chelsea Financial Services, said:
“Latin America, with several economies richly endowed with natural resources, appears particularly well positioned in the current environment. It also offers some of the most attractive valuations across emerging markets. What is striking is how underweight passive EM products remain to high-potential regions like Latin America, which is precisely where active managers can deliver alpha.
“While a weaker dollar provides a powerful macro tailwind for the asset class broadly, politics will be the decisive variable in individual markets and the factor most likely to drive the biggest divergences in performance.
“Politics carries significant weight in emerging markets, with a single election result or policy shift capable of moving currencies and re-rating entire markets. China is the obvious focal point, given the scale of the CCP’s influence on regional supply chains, commodity demand and broader investor sentiment. Brazil is also a good example as, despite strong fundamentals, key assets endure a political discount due to the current interventionist government.
“Presidential elections later this year could change that, with a shift in the right direction likely to trigger a sharp re-rating of both the currency and the broader market. Election results in Colombia and Peru could provide further positive catalysts for the region, with new administrations in each case having the potential to deliver a more market-friendly policy backdrop.”
A complex picture
Today’s EM story is far more complex and compelling than old stereotypes suggest. AI infrastructure and domestic reform, along with attractive valuations are all helping to reshape the investment case. The consensus view appears to be that broad-brush exposure is no longer enough.
For advisers and wealth managers, the challenge may not be whether to allocate to EMs, but where and with whom to do so.
