⦿ Executive Snapshot

• What: HSBC economists predict strong performance for emerging markets in 2026 due to a weakening US Dollar and supportive global policies.
• Who: HSBC economists and emerging market investors.
• Why it matters: The forecast highlights the potential for diversification and returns in emerging markets, particularly in the context of ongoing technological advancements and valuation opportunities.

⦿ Key Developments

• Emerging markets are positioned to benefit from a multi-year decline in the US Dollar, which could enhance returns.
• The performance of emerging markets is linked to their exposure to technology and AI, particularly in South Korea and Taiwan.
• Central banks outside the US may adopt hawkish policies, contributing to the sustained downtrend of the dollar.

⦿ Strategic Context

• Historically, emerging markets have been seen as undervalued, with significant potential for growth, especially in technology sectors.
• The current macroeconomic environment, characterized by easing geopolitical tensions and rising commodity prices, supports the narrative of emerging market resilience and opportunity.

⦿ Strategic Implications

• Immediate implications include increased investments in emerging markets as they are perceived as attractive due to lower valuations and tech exposure.
• Long-term implications suggest a shift in global investment trends, with more capital flowing into emerging markets as the dollar weakens and tech sectors grow.

⦿ Risks & Constraints

• Potential risks include geopolitical tensions that could disrupt the expected growth in emerging markets.
• Structural challenges such as regulatory environments and market maturity may hinder the full realization of growth potential in these regions.

⦿ Watchlist / Forward Signals

• Watch for central bank policies in key emerging market countries that may signal shifts in interest rates and investment climate.
• Upcoming earnings reports and economic indicators from South Korea and Taiwan could serve as early signals of the health of the tech sector within emerging markets.