Amundi says EM equities rally can extend on tech cycle

Binaya Dahal

Journalist

19 May 2026

Europe’s largest asset manager Amundi says emerging market equities may continue to benefit from an AI-driven technology cycle, though rising tensions in the Middle East could threaten parts of the rally by pushing up energy prices.

Debora Delbo, senior macro strategist at the Amundi Investment Institute, said an ongoing hardware and semiconductor upswing linked to AI is underpinning earnings across emerging Asia and is likely to continue assisting EM equities’ outperformance over developed markets.

However, she warned that any further escalation in the Strait of Hormuz, a critical oil and gas shipping route, would complicate fiscal policy in economies with limited financial buffers to absorb higher energy costs.

“Earnings growth is a key driver of this EM resilience, but divergences persist as EM countries are being affected unevenly,” she said. “Higher oil, gas, fertiliser and freight costs can slow disinflation, creating a tougher inflation and interest-rate trade-off for importers.”

Delbo added that fiscal capacity is becoming an increasingly important dividing line, shaping how economies absorb external shocks such as energy price spikes.

“For example, the fiscal space is greater in Korea, Taiwan and China than in India, Indonesia, the Philippines and Thailand,” she said. “Overall, EM resilience is also confirmed by smaller capital outflows, contained borrowing costs and stronger policy frameworks recently highlighted by the IMF.”

Earnings expectations for the MSCI EM Index have risen to about 31% EPS growth, though Delbo called this overly optimistic, while noting that Asian technology companies are delivering strong results.

However, despite the technology-led earnings cycle, she said valuations across emerging markets have yet to fully reflect recent momentum. The MSCI Emerging Markets Index continues to trade at a discount of about 39% on forward price-to-earnings and about 42% on price-to-book.

The €2.4 trillion asset manager said it remains constructive on emerging markets overall, including both EM Asia and EMEA, but emphasised the need for selectivity as dispersion across countries and sectors widens.

Within equities, the firm favours South Korea and Taiwan due to their strong exposure to the semiconductor and AI-related technology cycle, alongside solid earnings momentum. It also holds a positive view on Brazil, supported by improving earnings expectations and commodity exposure.

By contrast, the firm maintains a more neutral stance on China, where weaker earnings momentum offsets attractive valuations in H-shares. The group sees India as a long-term positive story but expects near-term pressure from its sensitivity to oil prices, heavy energy import dependence, and potential fiscal strain.