Chetan Sehgal, Lead Portfolio Manager at Templeton Emerging Markets Investment Trust, comments on the Emerging Market outlook for the rest of the year.
The outlook for EM equities in 2026 is supported by several investment themes that we believe will be a driver of earnings momentum.
The year started with the optimism on AI lending its strength to the broader information technology sector. We believe that AI will be a strong investment case across major EMs, with companies providing electronic manufacturing, power supply units and printed circuit-board services also standing to benefit.
The trickle-down effects of AI extend to power. This has resulted in higher demand for power equipment, such as energy storage batteries. We see opportunities in China’s industrial companies, which are meeting the needs of power infrastructure both domestically and internationally.
Supportive policies underpin the above broader investment themes. China has extended its anti-involution campaign into 2026, and we expect corporate earnings of Indian companies in 2026 to reflect the country’s policy support.
Brazil is well-positioned to benefit from a more accommodative interest-rate environment in 2026, and Mexico continues to be supported by nearshoring dynamics and its strategic proximity to the United States.
Overall, EM equities offer differentiated opportunities, best approached with a disciplined, selective strategy. Compelling long-term themes and supportive valuations in parts of EMs are among reasons for our optimism for 2026.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The writer’s views are their own and do not constitute financial advice.
This information should not be relied upon by retail clients or investment professionals. Reference to any particular investment does not constitute a recommendation to buy or sell the investment.
Main image: Latin America, Emerging markets, GEM, adolfo-felix-g5t8gj1g5HA-unsplash
