Emerging markets surge, what's fueling the new highs?

Emerging market equities have reached new highs despite an active conflict in the Middle East and persistent energy market uncertainty. For many investors, that resilience has raised a straightforward question: how durable is it?

Amundi, Europe’s largest asset manager, has a clear answer. The rally is real, it is earnings-driven and it has further to run, but not everywhere equally.

The earnings story is compelling, with caveats

Debora Delbo, senior emerging markets macro strategist at the Amundi Investment Institute, points to earnings growth as the foundation of the current resilience.

“Earnings growth is a key driver of this EM resilience, but divergences persist as EM countries are being affected unevenly.”

Earnings per share (EPS) expectations for the MSCI Emerging Markets Index have risen to 31 per cent. Amundi considers that figure too optimistic, but still expects strong underlying growth, particularly as the technology cycle continues to provide support. Asian technology companies have been delivering strong results, with EPS expectations for the sector stabilising at 66 per cent as of April 2026.

Valuations remain a further point of attraction. The MSCI Emerging Markets Index trades at a discount of approximately 39 per cent on a forward price-to-earnings basis and around 42 per cent on price-to-book relative to developed markets. For investors comparing opportunity sets globally, that gap is hard to ignore.

Where the vulnerabilities sit

The main risk is energy. Further disruption to the Strait of Hormuz, a critical oil and gas transit route, would push energy prices higher, complicate inflation dynamics and pressure fiscal policy in countries with limited buffers. The impact, however, is far from uniform.

Latin America is relatively insulated. The region is a net energy exporter and sits at a geographical distance from the conflict. Asian energy importers, by contrast, face a more challenging equation: higher oil, gas, fertiliser and freight costs slow disinflation and create a tougher trade-off between inflation and interest rates.

Fiscal capacity to absorb those pressures also varies significantly, with Korea, Taiwan and China better placed than India, Indonesia, the Philippines and Thailand.

Country by country: where Amundi stands

Korea and Taiwan are Amundi’s preferred markets within emerging markets Asia. Both benefit from the technology and semiconductor cycle, robust earnings momentum and reasonable valuations relative to their growth profiles.

In Korea, consensus 2026 EPS growth expectations sit at 91 per cent, driven by strong artificial intelligence (AI)-related memory demand. Hardware stocks have risen sharply and there is no sign yet of supply responding to higher memory prices, which supports semiconductor earnings.

Taiwan’s earnings revisions are the strongest in emerging markets Asia, supported by semiconductor and AI-related component demand; return on equity is close to 17 per cent.

India sits in neutral territory for now, though Amundi retains a positive long-term outlook. The country is one of the most oil-sensitive economies in emerging markets Asia, with energy imports at 2.7 per cent of gross domestic product (GDP) and around 40 per cent of oil and liquefied natural gas (LNG) sourced from the Middle East. Short-term headwinds from higher oil prices and fiscal pressure are real, but earnings expectations remain solid at close to 18 per cent consensus EPS growth.

China is also rated neutral. The economy has meaningful insulation through electrification, diversified energy imports and fuel-price caps, but inflation pressure through producer price index (PPI) and energy-intensive sectors remains a factor. Amundi prefers H-shares, where the policy backdrop is more supportive and valuations suggest greater upside potential.

Latin America rounds out the positive view. Brazil stands out, with IBES EPS growth expectations rising from 12 per cent in March to 21 per cent in April 2026, supported by high commodity prices. The region’s exposure to natural resources, including rare earths, precious metals and energy transition metals, adds further appeal. The October 2026 election in Brazil is a risk worth monitoring, but the earnings and macro backdrop remains constructive.

Where advisers should be looking

Emerging markets are not a monolithic call. The opportunity requires country-level conviction, an understanding of energy exposure and a clear view on where earnings revisions are heading.

Amundi’s analysis points to a compelling risk-reward case for advisers building globally diversified portfolios. This goes particularly in technology-driven Asian markets and commodity-supported Latin America. Valuations remain well below developed market peers.

Earnings are accelerating. And the regions best positioned to weather the energy shock are already showing it in their numbers. For clients with limited emerging markets exposure, the case for a closer look has rarely been stronger.