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 to 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. And in concert with that, 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 of that, the question has been: “Why did you need to bother with emerging markets?” And the answer has been: “You didn’t.” In actual fact, for nearly all of those 14 years, you had been better off year after year staying invested in US stocks and simply ignoring emerging market stocks.
Now, of course, that changed last year. Last year, in 2025, was the first year in 15 years where we saw a clear outperformance by emerging market stocks and by emerging market currencies against both the US equity market and against the US dollar. But of course, the starting point is those 14 years prior where investors had basically built up an overweight to the US dollar and to US equities.
And even in Europe, it’s the same story. European investors have been largely invested in European stocks. And if they go abroad, they have looked to the US, not to emerging markets. So that’s basically why emerging market stocks, even after a good performance last year, don’t carry a large weight today in most investors’ portfolios.
Charlotte de Kerpoisson:
What economic fundamentals argue for greater exposure to emerging market stocks today?
Edmund Shing:
Well first of all, we have good economic growth. Whether you’re talking about Asian economies, such as of course, China, Vietnam, South Korea or Taiwan or indeed, if you look elsewhere, for instance, to Eastern Europe, such as Poland, or then to Latin America, countries such as Mexico, Brazil and Chile, all are showing pretty strong economic growth combined with low or falling inflation.
Secondly, we have central banks in emerging markets, such as Brazil and Mexico that should be able to cut interest rates further this year. As long as the Federal Reserve in the US cuts interest rates, they will follow. That, of course, would also be a positive effect for emerging market economies and for the markets.
And thirdly, in many of these markets, the valuations are still very attractive at a time when US equities have become quite expensive. So there are several reasons why I think emerging markets still hold a lot of attraction for investors, both at the economic level, but also in terms of financial markets today.
Charlotte de Kerpoisson:
What is the relationship between stock market performance and the US dollar, Edmund?
Edmund Shing:
Well, if we look at times in the past, when the US dollar has weakened, there are two obvious asset classes that have benefitted from this weakening dollar, typically. Firstly commodities. They are priced in US dollars, for instance, whether you’re talking about oil, industrial metals or precious metals. Again, over these previous periods of a weakening dollar, commodities have tended to benefit, because again, they’re priced in dollars. So that has been one positive effect.
The second market that has typically performed very well is emerging markets, both equities and bonds. Why? Because again, if the dollar is weakening, their local currencies are typically strengthening, so that's one effect. Secondly, again you tend to be in a period where economic growth is really robust for these emerging markets. And again, that tends to have an impact on earnings growth, particularly for emerging market companies. So overall, when the dollar weakens, you expect to see stronger emerging market performance, in terms of 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?
Edmund Shing:
Well I think you are seeing accelerating growth, first of all in emerging markets, clearly for different reasons. If we take the two major blocs of emerging markets, firstly, Asia. Well of course Asia, particularly in terms of equities, is dominated by four countries: India, China, South Korea and Taiwan. In reality I would argue that South Korea and Taiwan and even China are not really emerging economies. But that’s the way they’re classified as such by the main index, MSCI, so we stick with that.
These are very heavily technology driven and have good growth thanks to technology exposure. If you think about South Korea for instance, they’re very heavy in chipmaking, as are the Taiwanese. The Chinese are very strong in all areas of technology, whether it be solar panels, batteries, chipmaking, all types of physical AI, such as making laptops and smartphones.
So in Asia, I would say a lot of the driver of economic growth and of earnings growth of these companies comes from the technology side of things. Of course, we are seeing this huge investment growth around artificial intelligence and data centres. Clearly that is just as true in Asia as it is elsewhere.
Secondly, if you look to Latin American economics, such as Brazil, Mexico and Chile, you have a different exposure, much more a commodity exposure. If we think about Mexico, it’s the biggest silver producer in the world. If we think about Chile, they’re one of the biggest copper and lithium producers in the world. Brazil are very big in the production of sugar cane, oil and iron ore. So in terms of Latin America, you’re talking much more about commodity exposure. Now this is an asset class we like a lot. We think commodity prices, despite the recent volatility, will continue to go higher in the medium term. That clearly is a long term positive for Latin American economies because they are very exposed to commodity production, therefore indirectly to these commodity prices.
So again, whether you talk about Asia or Latin America, there are different drivers, but the result is the same: strong earnings growth. On the flip side, valuation is still pretty attractive, particularly in Latin America. Very cheap P/Es still for Brazilian, Mexican and Chilean stocks, while offering very good dividend yields. So when you compare that for instance to the US, which is a rather expensive market, you really find quite good value in contrast, in emerging economies, but particularly specifically in Latin America.
Charlotte de Kerpoisson:
So which emerging markets do you particularly like at the moment, Edmund?
Edmund Shing:
I would focus on Latin America, because of the commodity content and because of the valuation and because of the yield. So I like Asia. We still like China. We think A shares, the domestic equity market in China, will do well because we expect domestic investors in China to gradually switch their investment horizons and their investment flows towards domestic equities.
So that should be good in time for China. But right now, today, I would say Latin America: Brazilian, Mexican and Chilean stocks are the real focus for us.
Charlotte de Kerpoisson:
Thank you very much, Edmund.
Edmund Shing:
Thank you, Charlotte.
Charlotte de Kerpoisson:
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