Emerging market (EM) returns are being bolstered by a number of long-term changes within specific countries, but also in the broader global background, which could lead to a multi-year upcycle, according to an international investment manager.
Aberdeen Investments emerging markets portfolio manager Matt Williams said EM shares rose around 34 per cent in United States dollar terms in 2025 and outperformed developed markets, and that trajectory was likely to continue into 2026.
Williams noted accommodative monetary policy, increased government spending and the potential for global capital to shift into those markets could add to the momentum behind EM currencies and asset prices this year.
“A key driver of the emerging markets outlook is the scale of global investment now underway. We are seeing a record investment cycle in areas such as artificial intelligence (AI), infrastructure, electrification, defence and supply chains,” he stated.
“Emerging markets are well positioned to benefit because many of the companies and resources needed to support that investment are located in these economies.
“Rising incomes, urbanisation and increasing domestic demand are [also] transforming many emerging economies, while infrastructure and industrial investment are creating new earnings opportunities across multiple sectors.”
He noted while technology was a significant structural opportunity in EMs, investors were looking at whether large-scale AI investment could be monetised.
“For global technology companies, the next phase will be proving that the enormous capital being invested in data centres and AI infrastructure can generate sustainable returns,” he said.
“That creates both risks and opportunities. Valuations in parts of the US technology sector are stretched, while emerging markets offer exposure to many of the companies enabling the next stage of AI adoption at more reasonable levels.
“Emerging markets still trade at a discount to developed markets on many metrics, even as earnings growth prospects remain strong.
“For investors willing to take a long-term view, the combination of structural growth, improving corporate governance and attractive valuations creates a compelling opportunity set.”