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Market Outlook

Q2 Emerging Markets (Core) Outlook

Outlook
12 July 2026

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Latest Emerging Markets (Core) economic and market outlook. 

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The structural case for emerging markets remains intact, underpinned by strong earnings growth in key markets and relatively attractive valuations. While this hasn’t changed, our view on the US dollar has become more nuanced. Longer term structural challenges undoubtedly remain, including persistent fiscal deficits, but higher US real yields are now attracting capital back into both US equity and fixed income markets. This has created a more supportive backdrop for the dollar in the short term. Importantly, we do not believe this necessarily detracts from the investment case for emerging markets, where much of the growth is being driven by the same AI tech cycle that the US is benefiting from.

The fund retains significant exposure to this theme, particularly in Taiwan, where valuations remain more attractive than elsewhere in the technology supply chain following a period of consolidation. By contrast, we have continued to reduce exposure to Korea following exceptionally strong performance. That said, we do maintain exposure to Korean memory names such as SK Square. The market is increasingly recognising that the current memory upcycle is likely to prove both stronger and longer lasting than previously expected. The emergence of agentic AI has driven a step change in memory demand, while supply remains constrained by a three player DRAM oligopoly, with meaningful new capacity unlikely to come on stream for several years. As a result, earnings expectations have continued to move higher. In addition, SK Square’s holding company discount to NAV has tightened from over 50% to below 40% as management continue to deliver on its capital return commitments.

Our focus in China remains firmly on advanced manufacturing exporters and the semiconductor value chain. We continue to favour businesses exposed to semi-cap equipment, printed circuit boards and optical components. Conversely, we remain cautious on the domestic consumer, where weak confidence and subdued demand continue to support our view that China is currently a two-speed economy.

Elsewhere, we have become increasingly constructive on Peru. The recent presidential election provides greater political clarity and, in our view, creates a favourable backdrop for a renewed investment cycle. With approximately US$65bn of mining projects awaiting development in an economy of around US$330bn, we believe Peru is approaching a significant period of capital investment that should support stronger lending activity, economic growth and corporate earnings. We also remain overweight Chile, where an improving cyclical backdrop should support the banks.

Overall, while we continue to adapt positioning as market leadership evolves, our highest conviction ideas remain centred on North Asian technology, the Andean region and selected areas of Chinese advanced manufacturing.

Important Information:

Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).

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