Emerging markets: Broadening gains persist in 2026 – HSBC

HSBC economists argue Emerging Markets (EM) remain well positioned in 2026 as the US Dollar (USD) weakens and global policy easing supports a broadening of returns beyond US mega-cap tech. They highlight EM exposure to the tech and AI theme via South Korea and Taiwan, plus valuation discounts and under-allocation that could benefit from a multi-year Dollar decline.

EM supported by tech and valuation tailwinds

"Global equities saw broad-based gains on signs of easing geopolitical tensions, as oil prices retreated over the week. In the US, momentum in AI stocks and continued strong Q1-26 earnings propelled major indices, including the S&P 500, the Nasdaq and the “Magnificent Seven”, to record highs, with the Philly semiconductor index outperforming."

"Nevertheless, there are plenty of factors that can keep the broadening out trade alive in 2026. Central banks outside of the US may end up being more hawkish, keeping the dollar-down trend intact. Europe is rearming, which provides fiscal multiplier effects and a new source of earnings growth."

"Emerging markets (EM) also remain a well-recognised play on the tech and AI theme – given their heavy exposure to South Korea and Taiwan – which is reflected in their year-to-date performance. Simultaneously, the diversification appeal of EM is sustained by valuation discounts, global portfolio under-allocation, and the potential for a multi-year decline in the dollar."

"Meanwhile, this year’s surge in commodity prices is not entirely bad news. Markets in Latin America and Frontiers stand to benefit, alongside developed market energy and materials names."

"In short, the AI tide is still rising, but it’s lifting a much wider fleet of boats in 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)