It's Not Too Late to Reinvest in Emerging Markets!

South Korean and Taiwanese technology widens the gap

While the geopolitical context unsettled the markets in March, investors have no reason to shun emerging markets and should instead take advantage of the entry points they offer. Since Donald Trump's return to the White House and the announcements of « Liberation Day » in April 2025, this asset class has once again become performant. Indeed, the weakening of the dollar and the asset class's fundamentals fully justify this renewed interest. In this context, we believe that the return of investment flows is just beginning. Emerging markets are now sought for their structural qualities rather than merely being used as adjustment niches. The lack of clarity in U.S. policy is encouraging investors to reassess their allocations in favor of these markets. Yet, emerging market equities still account for no more than 6% of global equity portfolios—a share that is expected to increase over the coming years.

While some preconceived notions haven't completely faded in the financial community, consensus has revised upwards the earnings growth expectations for MSCI Emerging Markets (EM) stocks for 2026, from 20% to 40% since the beginning of the year. Despite the recent rebound, it's not too late to jump on board. Emerging businesses are in full swing and are increasingly integrated into global value chains. Especially after a decade of underperformance, the valuation gap between the MSCI EM index and the MSCI World remains significant, around 35%!

The technology sector particularly enables South Korea and Taiwan to offer investors worldwide some prime gems. Today, 80% of the semiconductor supply chain used for AI deployment is controlled by South Korean and Taiwanese companies. Furthermore, the considerable capital expenditures by American hyperscalers are already producing tangible results for these Asian businesses. By mid-April, the expected earnings growth for technology stocks in the MSCI EM index for 2026 was projected at 140%, compared to 40% just four months ago!

In terms of energy transition, Asian companies also offer notable opportunities. China's lead in renewable energies and energy storage systems represents a major asset, especially in the race for artificial intelligence, even compared to the United States, whose aging electrical infrastructure requires significant investments. Beyond the dynamism of these technology stocks, emerging markets remain buoyed by strong domestic consumption, while deflationary threats in China are receding short-term.

Among issuers likely to interest investors, we can mention All Ring, a preferred supplier for TSMC providing equipment for advanced packaging. An integral part of the semiconductor giant's supply chain, this mid-cap Taiwanese company anticipates an annual profit growth of 50% over the next three years, driven by massive investments in AI and the deployment of increasingly advanced technologies. Brazilian neobank Nubank, which is listed in New York, also benefits from the growing penetration of banking products in Brazil and in Mexico, where it has more recently established itself. This financial stock expects an annual earnings growth of 30% over the next three years.