Charlotte de Kerpoisson:
Hello and welcome to this podcast by BNP Paribas Wealth Management. My name is Charlotte de Kerpoisson. January was a strong month for stocks and commodities. Indeed, global stocks gained 2% over the month, while precious and industrial metals delivered a good performance.
This month, we focus on emerging markets, one of our strongest investment convictions for 2026. And to discuss this topic in more detail, I’m delighted to be joined by Edmund Shing, Global Chief Investment Officer. Hello, Edmund.
Edmund Shing:
Hello, Charlotte.
Charlotte de Kerpoisson:
Edmund, you believe that investors are barely exposed to emerging markets in their portfolios. Can you explain why?
Edmund Shing:
Yes. Well, if we look first of all at the US, it’s quite clear that from 2011 to 2024, for 14 years in a row, the US equity market delivered a very strong performance. In parallel, the US dollar also generally strengthened. So whether you’re a US‑dollar‑based investor or a foreign investor based in another currency, you’ve done well principally by investing in American stocks in American dollars.
As a result, the question has been: “Why did you need to bother with emerging markets?” And the answer was: “You didn’t.” In actual fact, for nearly all of those 14 years, you were better off year after year staying invested in US stocks and simply ignoring emerging market stocks.
Now, of course, that changed last year. In 2025, we saw for the first time in 15 years a clear outperformance by emerging market stocks and emerging market currencies against both the US equity market and the US dollar. But the starting point remains those 14 prior years, during which investors built up a significant overweight to both the US dollar and US equities.
Even in Europe, it’s the same story. European investors have largely been invested in European stocks, and when they look abroad, they tend to look to the US rather than to emerging markets. That’s why, even after last year’s good performance, emerging market stocks still represent a relatively small weight in most investors’ portfolios today.
Charlotte de Kerpoisson:
What economic fundamentals argue for greater exposure to emerging market stocks today?
Edmund Shing:
First of all, we are seeing strong economic growth across many emerging markets. This is true in Asia — in countries such as China, Vietnam, South Korea and Taiwan — as well as in Eastern Europe, for example Poland, and in Latin America, with countries such as Mexico, Brazil and Chile. All of these economies are showing solid growth combined with low or falling inflation.
Secondly, central banks in emerging markets, such as Brazil and Mexico, should be able to cut interest rates further this year. As long as the US Federal Reserve cuts rates, they are likely to follow, which would be supportive for both emerging market economies and financial markets.
Thirdly, valuations in many emerging markets remain very attractive at a time when US equities have become quite expensive. For all these reasons, emerging markets continue to offer compelling opportunities for investors, both from an economic and a financial market perspective.
Charlotte de Kerpoisson:
What is the relationship between stock market performance and the US dollar, Edmund?
Edmund Shing:
Historically, when the US dollar weakens, two asset classes tend to benefit. The first is commodities. Commodities such as oil, industrial metals and precious metals are typically priced in US dollars, and during periods of dollar weakness, they have tended to perform well.
The second asset class that has typically benefited is emerging markets, both equities and bonds. When the dollar weakens, local emerging market currencies often strengthen. In addition, these periods usually coincide with strong economic growth in emerging markets, which supports earnings growth for emerging market companies. Overall, a weaker dollar tends to be associated with stronger performance across emerging market equities, bonds and currencies.
Charlotte de Kerpoisson:
How do emerging markets compare with developed markets, such as Europe or the US, in terms of valuation and growth?
Edmund Shing:
We are currently seeing accelerating growth in emerging markets, although for different reasons depending on the region. If we look at Asia, equity markets are dominated by four countries: India, China, South Korea and Taiwan. While South Korea, Taiwan and even China are arguably no longer emerging economies, they are still classified as such by the MSCI index, so we follow that convention.
These markets are heavily technology‑driven and benefit from strong growth linked to technology exposure. South Korea and Taiwan are major players in chip making, while China is strong across a wide range of technologies, including solar panels, batteries, chip making and physical AI, such as laptops and smartphones. Investment linked to artificial intelligence and data centres is growing rapidly in Asia, just as it is elsewhere in the world.
In Latin America, by contrast, growth is driven much more by commodities. Mexico is the world’s largest silver producer, Chile is one of the biggest producers of copper and lithium, and Brazil is a major producer of sugarcane, oil and iron ore. We believe commodity prices, despite recent volatility, will continue to rise over the medium term, which is a long‑term positive for Latin American economies.
Whether in Asia or Latin America, the result is strong earnings growth. On the valuation side, emerging markets — and Latin America in particular — remain very attractive. Valuations are low, with very low P/E ratios for Brazilian, Mexican and Chilean stocks, while dividend yields are also high. Compared with the relatively expensive US market, this represents a clear value opportunity.
Charlotte de Kerpoisson:
So which emerging markets do you particularly like at the moment?
Edmund Shing:
Our main focus today is Latin America, because of its commodity exposure, attractive valuations and strong yields. We also like Asia and remain positive on China. In particular, we believe that A‑shares — the domestic equity market in China — should perform well over time, as domestic investors gradually shift their investment horizons and flows towards local equities.
That said, right now our key focus remains Latin America: Brazilian, Mexican and Chilean stocks.
Charlotte de Kerpoisson:
Thank you very much, Edmund.
Edmund Shing:
Thank you, Charlotte.
Charlotte de Kerpoisson:
Thank you for watching this video. If you would like further information about our investment strategy research, podcasts or investment themes for 2026, please visit our website or contact your relationship manager. Goodbye.