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Market Outlook

Emerging Markets (Core) Outlook

Outlook
12 October 2025

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Latest Emerging Markets (Core) economic and market outlook. 

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We expect the unwind in US positioning to continue, driven by persistent fiscal imbalances, political gridlock, policy uncertainty and a narrowing growth differential with the rest of the world. In this context, capital flows should gradually rotate out of the US and into EM.

Drilling down into individual markets, we are particularly constructive on AI semis/hardware enablers in Taiwan and Korea. It appears that the world is entering a new era of rapid increases in Generative AI capabilities, driven by greater LLM creativity and strategic thinking at the ‘frontier’, as well as the falling development costs of smaller models. Oracle recently announced an order from OpenAI worth $300bn over 5 years for data centre capacity. The scale of this deal is a watershed moment, and further confirmation of the ongoing AI arms race. It will likely lead to others increasing their spending to avoid being left behind. Against this backdrop, many companies in Taiwan and Korea should benefit from an accelerated product cycle that drives rapid specification and content upgrades across processors, connectivity, networking and memory. Korea has the additional kicker of its Value Up programme, where developments continue to be positive. There is increasing speculation that the government will announce mandatory cancelations of Treasury shares. This would be extremely positive for a number of our holdings.

We are also constructive on Chile. Heading into the November election, the country must choose between two polarised candidates; one a far-right conservative and one from the communist party. During our recent research trip, there was clearly strong demand from the population to improve security and clamp down on migration after a big increase in crime. The main agenda of the right-wing candidate is to improve this situation and pursue a pro-market agenda based on tax cuts, deregulation and reducing government spending. Both the currency and stock market appear attractively valued, and we have therefore built our exposure.

We continue to see a two-speed economy in China. The domestic side looks weak, with PPI in negative territory, but exports remain reasonably strong. Beijing has been injecting significant liquidity into the system, which is notable as there is a strong link between M1 money growth and Chinese equity market performance. Our focus in China continues to be on opportunities aligned with Beijing’s strategic goals in advanced manufacturing, EVs, AI and robotics. Recently we have added to Alibaba and Tencent, both of which have leading positions in AI that we expect to be key growth drivers.

Elsewhere, we remain cautious on Brazil, where we believe the electoral outcome is less clear than stock prices suggest. We have taken profits and plan to remain on the sidelines, monitoring developments for the time being.

In Argentina, the Buenos Aires provincial election was a clear political setback for President Milei, causing a sharp sell-off in Argentinian assets. However, Milei’s subsequent meetings in New York with Donald Trump and US Treasury Secretary Scott Bessent have helped to stabilise the situation. Bessent echoed Mario Draghi’s famous “whatever it takes” pledge, signalling that Washington is prepared to use “large and forceful” measures to sustain Argentina’s financial markets, including potential FX support, debt purchases, or Treasury interventions. Trump reinforced the message, saying the US would “help” Argentina, praising Milei’s reforms and offering his endorsement. The US has since confirmed ongoing discussions on a USD20bn swap line and that it is ready to buy Argentina’s dollar bonds. This show of support matters because it directly addresses one of the market’s biggest concerns: Argentina’s ability to roll over debt and maintain access to funding. By offering the possibility of US FX support or debt purchases, Bessent and Trump reassured investors that Argentina is unlikely to face an imminent liquidity squeeze. With the prospect of a US backstop in place, the risk of a disorderly loss of market access has been greatly reduced. We have cut exposure to mid-single digits, and are comfortable with the current risk/reward dynamics. For example, banks are currently trading on 1x trailing Book Value. However, markets will likely remain jittery into the October elections.

Finally, despite India’s structural attractiveness, valuations, earnings expectations and geopolitical risks remain elevated, whilst significant equity supply continues to weigh on the market. We remain underweight against this backdrop. 

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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