Emerging markets are expected to continue their strong performance into 2026, bolstered by appealing valuations, a softening US dollar, and the implementation of more accommodative monetary policies within these regions, according to Navin Hingorani, portfolio manager at Eastspring Investments. Hingorani noted that the favourable conditions that propelled emerging markets to surpass the S&P 500 by approximately 16 per cent in 2025 are still present. A key factor is the weaker US dollar, which provides significant advantages to emerging economies.
Hingorani elaborated that emerging markets generally maintain higher real interest rates compared to developed markets, allowing them greater flexibility to reduce these rates. A depreciating US dollar further incentivises emerging markets to ease their monetary policies. Controlled inflation paired with lower interest rates creates a positive environment for robust domestic demand within these markets. Eastspring Investments is an asset management company providing a range of investment solutions to institutions and individuals.
Valuation discrepancies continue to favour emerging markets substantially. Hingorani pointed out that even after a year of robust growth, emerging markets are still trading at a discount of around 60 per cent on a price-to-book basis when compared to the United States. He cited South Korea as a prime example of how previously undervalued markets can rapidly unlock value.
Hingorani stated that strong valuations, supportive policy frameworks, and improving fundamental economic factors collectively suggest that investors should pay close attention to the potential of emerging markets. The convergence of these elements creates a compelling case for investment and growth in these regions.
