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By Alexander Treves, Head of Investment Specialists for Asia Pacific, Emerging Markets and Asia Pacific Equities Team, J.P. Morgan Asset Management
Global uncertainty is on the rise, yet we believe emerging markets (EM) and Asia Pacific (APAC) equities continue to present robust opportunities for diversification and growth. North Asia’s leadership in artificial intelligence (AI) is boosting earnings and capital returns while China presents unique chances for innovation and income. There are also growing opportunities to diversify across the wider region.
Here are five reasons1 why investment opportunities in EM and APAC equities remain strong, alongside potential risks to keep in mind.
1. Riding the tailwinds of a weaker US dollar and inflationary boom
Recent US dollar (USD) weakness has given EM equities a significant boost and we see more room for depreciation as US growth continues to trail other regions. The greenback also remains overvalued – presenting a sustained tailwind for EM assets.
Additionally, most economies outside China are seeing strong growth2 and manageable inflation, which supports sectors and assets with pricing power. Emerging markets tend to serve as the world’s factory and store of value, largely because of their strength in commodities, precious metals, and technology. Policy rates are still low, inflation remains moderate, and funding costs are under control – conditions that usually help keep the economic boom going.
2. Engine of the AI build-out
EM and APAC tech includes global leaders in semiconductors design & fabrication, hardware, Information Technology (IT) services, and cloud technology. While the leading US IT services companies are well known, EM and APAC tech companies are also underwriting the AI revolution, with AI-related demand providing a strong tailwind for Asian manufacturers.
Today, Asia produces 70% of the world’s semiconductors3. While the US still designs most logic chips, the manufacturing is concentrated in Taiwan and South Korea, where tech stocks continue to benefit from increased AI adoption and higher capex, despite ongoing debate about return on investment.
China’s AI spending is also set to accelerate into 2026. For example, a Chinese AI company known for developing large language models and generative AI technologies has catalysed domestic AI investment, creating a broad universe of software and AI capex beneficiaries, independent of the developed world’s cycle. Government support and a deep engineering talent pool are accelerating progress. Hyperscalers are leading a new wave of AI capex. China is advancing in lagging-edge chips and assembly too, focusing on self-reliance.
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3. Valuations and proving capital return driven by earnings growth
EM and APAC equity valuations remain relatively attractive compared to developed markets, as the chart shows5. With robust earnings per share growth in technology, as well as in select materials and financial stocks, there is potential for earnings to broaden through 2026.
India, for example, has lagged the MSCI EM by over 50% in the past two years, so its valuations are no longer inflated. MSCI India is trading at around 19–20 times forward earnings, which matches its 15-year average5, and its premium to EM (about 60%) is consistent with historical levels. We believe India is now reasonably priced for investors as the world’s fastest-growing major economy.
- Source: China Securities Index, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. All valuation measures are based on respective MSCI data, except the U.S., which is represented by the S&P 500, and China A, which is represented by the CSI 300 index. Price-to-earnings (P/E) and price-to-book (P/B) ratios are in local currency terms. Past performance is not a reliable indicator of current and future results. Guide to the Markets – Asia. Data reflect most recently available as of 31.03.2026.
Additionally, some EM and APAC markets are embracing shareholder reform. South Korea, for instance, is advancing reforms to boost shareholder returns through its corporate Value-Up programme, targeting improved capital efficiency and governance. Improvements are evident in dividend payouts, share buybacks, and board independence, with companies setting clear return-on-equity and return-on-invested-capital targets.
4. China’s twin opportunity: Innovation and income in a deflationary environment
China presents a notable contrast: world-class technology and manufacturing alongside weak consumer demand and lingering issues in the property market. As real estate investment slows, policymakers are doubling down on advanced manufacturing and technology to drive the next wave of growth.
China also appears to be moving from a deflationary bust towards a deflationary boom, where falling prices coexist with rising output and innovation. This shift presents a unique dual opportunity: high-growth AI and industrial leaders that benefit from price competitiveness and market share gains, as well as higher-yielding insurers and shareholder-friendly platforms for income.
5. Diversification: More than just China
Although China often takes centre stage in the EM and APAC narrative, these markets encompass a much broader and richer landscape. Investors are presented with a mosaic of diverse growth drivers, such as AI infrastructure, financial sector expansion, and commodity exposure.
EM and APAC markets today are a diverse group of dynamic economies, each presenting distinct contributions to earnings growth, capital returns, and portfolio diversification. This breadth may be critical for global investors seeking to move beyond concentrated developed market mega-cap risk and capture the full spectrum of EM and APAC growth.
For example:
- India, despite elevated valuations in line with longer-term average5 and a mid-cycle slowdown in economic and earnings growth, is supported by structural reforms, strong balance sheets, and a healthy banking system.
- Emerging markets across Europe, the Middle East and Africa (EMEA) bring together resource-rich and reform-minded markets that are well-positioned to benefit from global commodity cycles.
- Lower rates across Latin America are set to support economic activity and lift consumer sentiment, while stable or declining inflation and limited exposure to US trade present a constructive outlook for equities through 2026.
Conclusion
As global capital reallocates and earnings breadth widens, we believe the case for an EM and APAC allocation – including China and other markets in North Asia, South and Southeast Asia, EMEA and Latin America – only gets stronger.
Provided for information only based on market conditions as of date of publication, not to be construed as offer, research, investment recommendation or advice. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.
Diversification does not guarantee investment return and does not eliminate the risk of loss.
- Source: J.P. Morgan Asset Management, “Emerging Markets and Asia Pacific equities – Five reasons why the opportunity persists into 2026”, March 2026.
- Source: FactSet, Markit, J.P. Morgan Asset Management. Based on PMI relative to the 50 level, which indicates acceleration or deceleration of the sector, for the time period shown. Based on quarterly averages, with the exception of the two most recent figures, which are single month readings. DM and EM represent developed markets and emerging markets, respectively. Guide to the Markets – Australia, “Global economic momentum”. Data as of 31.03.2026.
- Source: FactSet, MSCI, SEMI, SIA, J.P. Morgan Asset Management. Hardware and IT equipment includes electronic equipment instruments & components, communications equipment, semiconductors & semiconductor equipment and technology hardware storage & peripherals. Software and IT services include IT services, software, interactive media & services and broadline retail. Based on MSCI AC Asia Pacific index and GICS classification. *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 – Asia. “Asia Pacific equities: Technology sector”. Data reflect most recently available as of 31.03.2026.
- The rating published on 03/2025 for JPMorgan Emerging Markets Research Enhanced Index Equity Active ETF is issued by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec Research). Ratings are general advice only and have been prepared without taking account of investors’ objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec Research assumes no obligation to update. Lonsec Research uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings information and to access the full report. © 2025 Lonsec. All rights reserved.
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