By Alexander Treves, Head of Investment Specialists for Asia Pacific, Emerging Markets and Asia Pacific Equities Team, J.P. Morgan Asset Management
Still see emerging markets (EM) as risky? Think again.
It’s an evolving environment
Since 2025, EM have benefitted from a strong macro backdrop, making bottom-up stock selection more rewarding. EM equities gained as “US exceptionalism” faded, the US dollar (USD) weakened, financial conditions eased, and the Federal Reserve cut rates middle of that year. They were also supported by strong themes such as artificial intelligence (AI)-driven manufacturing demand and a broad commodity rally, with precious metals reaching record highs.
These macro shifts led to significant dispersion across regions and sectors, presenting relatively attractive opportunities for active asset managers. And our EM strategy was well-positioned in this environment.
Year-to-date relative performance of the JPMorgan Emerging Markets Research Enhanced Index Equity Active ETF (JEME) was driven by strong stock selection – particularly in materials and information technology—with notable contributions from commodity-exposed materials and North Asian technology companies tied to the AI supply chain. Stock selection in China and India also added value.
Reinforce, refine and reposition
Year-to-date gains from the JEME strategy reflect strong stock selection sourced from our research platform, instead of a change in risk profile. Our team has taken additional steps to reinforce our resources, refine our processes, and reposition portfolios while maintaining the core of our research and portfolio management approach. This included significant progress in rolling out “Industry Frameworks” to anchor long-term forecasts and systematically tracking investment thesis signposts through “Predetermined Game Plans” to build conviction and inform position sizing. We also placed greater emphasis on analyst funds in our Research team’s end-of-year metrics, prioritising actionable research ideas.
AI: Semiconductor exposure and valuations
A meaningful share of JEME’s excess return has come from Taiwan and South Korea tech companies. To preserve sector neutrality, excess exposure in a large benchmark constituent was reallocated to other technology holdings in the two markets. Based on fundamental research, we increased allocations to a basket of supply-chain and adjacent beneficiaries that provide similar thematic exposure. These proxy positions typically carry higher beta and, year-to-date, has materially supported portfolio returns.
2.Source: FactSet, MSCI, SEMI, SIA, J.P. Morgan Asset Management. MSCI Asia Technology refers to MSCI Asia Information Tech Index. *Market share based on production capacity for wafer fabrication and industry value added for others. Data based on BCG analysis in 2025 for production capacity and in 2024 for industry value added. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Australia. Data as of 30.06.2026.
As shown, the chart on the left compares the valuations of the tech sector in the US and Asia. While the chart on the right illustrates the share of semiconductor and memory production by market – highlighting that Asia’s leadership in tech hardware are not yet fully reflected in relative valuations.
We have been actively managing the risk associated with high performers by taking gains in winners and adding to laggards where conviction and valuation support remains. The key activity has been balancing valuation with opportunity — rotating out of strong winners and keeping exposure to names where we have strong conviction and are finding better value — to ensure we are not taking unintended stock-specific risk.
Risk management and oversight are integral to the process, and we ensure that strong performers remain within stock limits and within risk control bands to avoid any unintended risks.
Conclusion
The macro backdrop remains supportive of EM equities. A weaker USD, continued government spending, and a multi-year AI and infrastructure investment cycle are supporting EM and Asia Pacific equity markets. No doubt, the Middle East conflict is a near-term risk, especially for energy importers. Even so, global markets have mostly looked through near-term volatility as long as the AI cycle remains intact.
Outside China, most EM economies are seeing higher inflation that supports industrials, defense, and commodities, while China shows early signs of moving out of a long deflationary period.
Overall, we believe JEME is well positioned for a high-dispersion market, with disciplined risk management and strong stock selection to generate alpha.
