Emerging Markets Rally: India and Vietnam Lead Growth in 2025

Emerging Markets' Comeback in 2025

• 📈 Emerging markets experienced a strong comeback in 2025, with the MSCI Emerging Markets Index up 26% for the year.
• 💡 This growth occurred despite initial investor concerns about US trade policies and a desire to diversify away from US assets.

China's Resurgence and AI Influence

• 🇨🇳 Chinese equities have seen a comeback, driven by government initiatives for real estate stabilization and investment encouragement.
• 🤖 The announcement of China's AI capabilities provided a significant boost, signaling their role in the global AI race.
• 🔑 Stable and predictable government policies are crucial for maintaining foreign investor confidence in China.

Semiconductor Industry and Global Dynamics

• semiconductor companies in Taiwan and Korea are benefiting from US initiatives, regardless of manufacturing location.
• ⚡ The technological prowess and manufacturing capacity in Asia for semiconductors are expected to remain critical in 2026.

Dollar Performance and Emerging Market Valuations

• 📉 The US dollar is expected to remain flat to weak in the new year, with the Fed on a gradual easing pace.
• 📊 Emerging markets started the year with significantly lower valuations compared to US equities, offering a fundamental attraction for investors.
• 💰 Even after outperforming, emerging markets still present lower price-to-book and PE ratios than the US.

Top Markets for Investor Allocation

• 🇮🇳 India is highlighted as a key market with a strong macro economy, easing interest rates, and poised for earnings growth, encouraging an overweight allocation.
• 🇻🇳 Vietnam, though not yet officially an emerging market by some benchmarks, delivered over 50% returns and is expected to achieve emerging market status in the FTSE benchmarks in the fall of 2026.
• 🌍 Vietnam's growth is supported by positive demographics and a strong local economy, making it an attractive investment despite potential trade obstacles.