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by Laurence Bensafi, CFA, Managing Director and Portfolio Manager, Deputy Head of Emerging Market Equities, RBC Global Asset Management (UK) Limited Dec 12, 2025

Laurence Bensafi, Managing Director and Portfolio Manager, Deputy Head of Emerging Market Equities, RBC Global Asset Management (UK) Limited, summarizes the market in 2025 for the asset class, and gives her thoughts for 2026.

  • Emerging market equities have doubled the performance of the S&P 500 this year, driven by China's AI advancements, strong AI-related stocks in Korea and Taiwan, and a tariffs announcements that highlighted U.S. dependence on emerging markets for imports.

  • We believe we are at a turning point for Emerging Markets Equities in 2026, as emerging markets are poised to be valued more accurately in equity portfolios, contrasting with developed countries facing political instability, high deficits, and debt.

  • Sustained long-term growth requires higher equity returns and faster earnings in emerging markets, though recent reforms (e.g., Korea’s value-up program, China’s share buybacks) signal improving trends.

  • Developed countries are increasingly resembling the emerging markets of the past, with political instability, high deficits, high debt and high inflation. Emerging market countries have in the meantime used globalization and a deindustrialization of developed countries to their advantage.

  • While foundational strengths are in place, execution of reforms and profitability enhancements will be critical for a sustained long-term rally.

Watch time: 3.14

View transcript

How would you summarize 2025 in Emerging Market Equities?

Laurence Bensafi

Emerging market equities have done very well so far this year, doubling the performance of the S&P 500. There were three main drivers. Number one, China is back. Thanks to DeepSeek, the country showed the world it is probably not as far behind as thought in the AI race. Number two, the strong performance of names exposed to the AI theme in Korea and Taiwan. IT is now by far the biggest sector in emerging markets as the entire AI manufacturing chain is located in Asia. Number three, Liberation Day, at the beginning of April, the tariffs announcement backfired as itexposed the dependence of the US to many countries, most notably to emerging markets for imports. EM equities were very cheap and under owned, helping to fuel a large rally. 

What is your outlook for Emerging Market Equities in 2026?

Laurence Bensafi

Looking into 2026, we believe that we are at a turning point for emerging market equities that are about to be valued at their true worth and to have the place they deserve in equity portfolios. A place that was important but which has been greatly reduced because the asset class has underperformed for a long time in an environment of strong earnings growth in the US, with also a very strong US dollar.

However, when we take a closer look, developed countries are increasingly resembling the emerging markets of the past, political instability, high deficits, high debt, high inflation. Emerging market countries have, in the meantime, used globalisation and a deindustrialisation of developed countries to their advantage. Many reforms have also been implemented. And the result is that the majority of emerging market countries now have half the debt and deficits of developed countries. After the strong recent performance and to sustain the rally over the long term, we would need to see higher returns on equities and faster earnings growth.

They are both currently lower in emerging markets than in the U.S. We, however, believe that the trend has been improving recently and will continue to do so as reform to generate better shareholder returns have been announced in several countries. For instance, with the value-up programme in Korea, the market has risen 100% this year, as the new government has announced that its number one priority is to improve the quality of corporates. In China, share buybacks hardly existed, and are very common, so we're going in the right direction. In China, another driver for improving returns would be to tackle overcapacity and lower the saving rate.

Few of those improvements are priced in with many opportunities in the asset class, notably in the Quality and Value segments. China remains attractively valued. In terms of sector, there are many opportunities in Financials and Consumer Staples that are very undervalued. In summary, emerging markets equities are very well positioned, but they also have to deliver, especially earnings growth and better profitability, for a sustained long-term rally. The foundations are solid, but in the next few years, execution will be key.

Video recorded on November 21, 2025

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Date of publication: Dec 12, 2025

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