UBS On-Air: Market Moves

Top of the Morning: The landscape for Emerging Market Equities

15 min

UBS CIO maintains a constructive outlook on Emerging Market equities for the next 12 months, despite recent geopolitical volatility from the Middle East, viewing market dips as temporary. This positive outlook is driven by strong fundamentals, attractive valuations, ongoing tech and AI innovation, and supportive macro conditions, with an expectation of significant earnings growth in EM companies. Investors are advised to stay diversified and leverage volatility, focusing on key regions like China tech, Korea, India, and Brazil.

Summarized by Podsumo

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✨ Key Takeaways

1

Geopolitical shocks are temporary

Despite a *9% drop* in EM equities due to Middle East conflicts, history suggests these events have sharp but short-lived effects, making diversification and using volatility advantageous.
2

Strong EM fundamentals and AI leadership

UBS CIO is constructive on EM stocks for the next 12 months, citing *29% expected earnings growth* this year, attractive valuations, and EM's critical role in the global AI value chain (semis, memory, rare earth minerals).
3

South Korea upgraded to attractive

Following a technical correction, South Korean equities were upgraded due to strong fundamentals and positioning to benefit from the ongoing upcycle, supported by positive reforms.
4

China's strategic growth and tech focus

China's *2026 GDP growth target of 1.5% to 5%* prioritizes high-quality growth, innovation, and tech self-sufficiency, with a portfolio focus on *China tech* for both near-term momentum and long-term potential.
5

Diversified approach for opportunities and risks

While geopolitical tensions are the main risk, a broad-based, diversified approach across EM (e.g., China, India, Brazil, Korea, Malaysia, Indonesia) is recommended to capture structural upside and navigate ongoing volatility.

💬 Notable Quotes

"History tells us that unless it's a broader economic sort of regime change or economic shift, markets tend to recover from this kind of geopolitical shocks. In fact, at least events usually have sharp but short-lived effects on markets."

— Shing Chen
"What keeps us positive are the strong fundamentals on going tech and AI innovation and also supportive macro conditions. We really see these three elements coming together."

— Laura Smith
"I think importantly market leadership is broadening. It's not just about tech anymore. We're seeing strength and commodity oriented and cyclical markets like Brazil, pockets of India and also Southeast Asia."

— Laura Smith