Emerging markets have been strong since the start of the year, but investors haven’t noticed.
- Emerging markets sit at the heart of two of the most significant trends of this generation: AI and the energy transition
- Emerging markets had a strong run in 2025 and have maintained that momentum in 2026
- Foreign investors pulled $70.3 billion from emerging market assets in March
Emerging markets are in a “silent bull market”, says Ben Durrant, investment manager in the emerging markets equity team at Baillie Gifford. This bull market has the capacity to endure, with emerging markets sitting at the heart of two of the most significant trends of this generation: AI and the energy transition.
Emerging markets had a strong run in 2025 and have maintained that momentum in 2026. The average emerging market fund is up 14.9% for the year to date, compared to just 3.5% for the average North American fund. The sector has been led by the strong performance of Latin America, which has benefited from its commodities wealth, and Asia, where the AI supply chain companies have had momentum.
Durrant points out that the energy transition is a huge manufacturing challenge, requiring a wide range of commodities, almost all of which are located in emerging markets. “In China, for example, we own Zijin Mining Group, which has added more copper production over the last five years than all of the Western majors combined, and then doubled,” he says. China has been faster than other global powers to recognise the importance of supply of critical commodities.
Emerging markets are also supplying the crucial building blocks for the AI complex. Durrant says the bottlenecks for AI are data centres. AI can only grow if these data centres facilitate it. More often than not, it is Asian technology that is filling them. He says: “80% of the memory that sits on or next with an NVIDIA chip comes from South Korea, and yet, SK Hynix trades up under four times earnings.”
Emerging markets still appear underappreciated by investors. A report from the Institute of International Finance showed foreign investors pulled $70.3 billion from emerging market assets in March, the biggest outflow since the pandemic rout in March 2020. This is in spite of the recent strong performance. As Durrant says, “40% of global GDP is coming from emerging markets, and the majority of GDP growth, yet they are only 10% or so of global indices. That feels wrong.”
He stops short of suggesting that emerging markets could be on the cusp of a new supercycle. But it is plausible given that the US is relinquishing global leadership and the world is increasingly ‘multi-polar’. Emerging market companies sit at the heart of two of the most important global trends and yet remain overlooked and underowned by investors. It feels like a reappraisal is due.
