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East Capital Outlook 2026: Why invest in emerging and frontier markets in 2026?
East Capital Outlook 2026 730x480
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2025 has been a fantastic year for emerging and frontier markets, which shrugged off trade tensions and geopolitics to deliver returns of 30% and 41% in USD terms respectively over the first 11 months. We believe that 2026 will likely be another good year, thanks to a relatively benign macro backdrop characterised by falling rates globally, a "softer for longer" USD and low investor positioning. Despite representing 11% of MSCI ACWI (and 40% of global GDP), only 5% of global equity AUM is invested in emerging markets for the time being, though plenty of investors are "doing their homework" on the asset class.
A central theme in this year’s outlook is how the nature of emerging markets has changed. These markets are no longer defined primarily by consumption but by leadership in critical technologies and supply chains. Taiwan and Korea form the backbone of the global AI value chain, China continues to host world-leading companies across advanced industries and India offers a broad, resilient base of company-specific structural growth supported by rising competitiveness and strong domestic demand. Frontier markets contribute further depth, combining attractive valuations with low correlations that can strengthen a broader portfolio.
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