Playing for Growth: Why Emerging Markets May Belong in Your Portfolio

Key takeaways

• This year’s global soccer tournament brings together countries with distinct strategies and styles of play and offers a good reminder for investors to consider the role that global equities may play in a diversified portfolio.
• International equities, particularly emerging markets, have posted strong gains over the past year, driven by improving fundamentals and the global AI build-out.
• We see potential for further growth as supportive macro and structural trends – such as favorable EM demographics – remain in place.
• Investors seeking efficient, low‑cost EM exposure may consider the iShares Core MSCI Emerging Markets ETF (IEMG), which offers broad access across large-, mid- and small‑cap EM equities.

As the biggest global soccer tournament kicks off across the U.S., Mexico and Canada in June, it brings together teams from across Asia, Africa, South America, Europe and Oceania. Each of the countries competing this year, from South Korea to Brazil, Australia to Sweden, is shaped by distinct strategies and styles of play. Global markets evolve in much the same way, with economies driven by different regional, sectoral, and currency dynamics. Just as fans follow teams from around the world, investors may benefit from looking beyond their home market and keeping a close eye on global equity opportunities. In particular, we believe investors may want to consider opportunities within emerging markets (EM), such as South Korea, Taiwan, Brazil and India.

Which countries should you consider for your investing starting line-up?

EM equities have built on a successful 2025 season and have continued delivering strong, broad-based performance year-to-date, with gains spread across multiple countries rather than a narrow set of winners.¹ This strength has been driven by earnings per share (EPS) growth and upward revisions, not multiple expansion (Figure 1), underscoring that momentum is led by fundamentals. Looking ahead, EM equities are expected to post leading EPS growth among major regions, with forecasts around ~20% in 2026.² To read more about our preference for emerging over developed market equities, see our Spring Investment Directions.

Figure 1 – YTD total return decomposition

How is AI powering performance in emerging markets?

A key underlying driver of potential growth in emerging markets could be the next phase of the global AI buildout. The initial AI boom was dominated by U.S. mega‑caps focused on model development, cloud platforms and enterprise software. Now, the story is broadening to the “capacity‑driven” parts of the ecosystem — the global infrastructure required to train, run and deploy AI at scale. This capital spending disproportionately benefits certain countries and regions, particularly outside of the U.S., especially South Korea and Brazil—rather than delivering broad-based global spillovers.³ EM can provide differentiated access to this side of the AI buildout cycle, complementing U.S. leaders rather than replacing them.

In particular, EM in Asia, sit at the center of the AI supply chain given the region’s deep manufacturing base and critical role in the global technology ecosystem. In fact, 75% of the world’s chip manufacturing is centered in East Asia.⁴ Resource-rich Latin American countries such as Brazil may also be set to benefit amid rising demand for rare earth minerals, which are used in chip manufacturing.

At the index level, semiconductors make up about 16% of EM industry weights, with another ~6% in tech hardware.⁵ This tilt positions EM Asia to potentially benefit directly from the AI-linked capex cycle in semiconductor manufacturing, data center buildout and the energy infrastructure needed to power it. These trends have started to show up in the data, with EM forward earnings growth now outpacing those in the U.S. (Figure 2).

Figure 2 – EM and U.S. 12-month forward earnings growth

Meanwhile, resource-rich economies in Latin America have increasingly benefitted from the surge in AI-driven demand for critical commodities, particularly copper and lithium.⁶ The rapid expansion of data centers and power networks requires significant amounts of copper for electrical wiring, energy transmission, and cooling systems, making it a core input to the digital economy.

Who are our top preferred three emerging market players right now?

As of mid-2026, the top three emerging markets for investment are: South Korea, Taiwan, and Brazil, all of which are benefitting from AI and its buildout.

• Taiwan’s outlook is positive, driven by strong AI-related semiconductor demand. Earnings growth expectations for 2026 have been upgraded to 30%+, with pricing power spreading beyond AI into broader sectors—signaling a maturing bull market.⁷ Ongoing chip capacity expansion is expected to lift GDP to ~7.7% in 2026, placing Taiwan among the fastest-growing developing markets.⁸
• South Korea has emerged as a high conviction international market exposure, supported by strong sentiment, positive earnings momentum and continued upward EPS revisions. The country, which has been benefitting from renewed semiconductor demand, has seen significant expansion in its market capitalization, with Taiwan and South Korea’s combined equity markets now larger than those of India and China combined, a reversal from just a year ago.⁹ To read more, see our article “International stocks: Getting tactical and targeted in 2026.”
• Brazil’s economic growth has been supported by improved domestic conditions and a gradual rate-cutting cycle, and AI-led commodity demand. Rising global investment in AI infrastructure has increased demand for energy and raw materials,¹⁰ benefiting Brazil’s commodity-heavy economy—particularly through higher oil prices.

How can investors gain exposure to emerging markets?

For investors seeking exposure to EM potential growth, ETFs can be a simple and efficient implementation tool. We’ve seen increased demand for EM ETFs as investors look to participate in these opportunities — nearly $33 billion has flowed into broader EM ETFs year to date, surpassing the total inflows for full-year 2025.¹¹ Meanwhile, as more investors are looking to pick the “star team,” they have increasingly used granular geographic exposures such as EM ex-China for regional allocations, single country ETFs to get dedicated exposures efficiently, or actively managed strategies that allow flexible adjustment of country weights based on high conviction investment ideas.¹²