HSBC: Emerging Markets to Outperform in H2 2026

🔥 Main Takeaway

HSBC is bullish on emerging markets for H2 2026, predicting continued outperformance driven by attractive valuations and a surging tech wave.

📌 What Happened?

HSBC forecasts emerging market equities to keep their strong momentum through the second half of 2026.

These markets already crushed it in H1, delivering a massive 24% return in USD, significantly outperforming developed peers.

A major valuation gap is key: the MSCI Emerging Markets Index trades at just 11.5 times its forward price-to-earnings, way below global equities at 17.5 times.

India and China are flagged as regions to watch for even stronger performance, while AI and the broader technology sector are central.

Countries like South Korea and Taiwan are already seeing huge capital expenditure in AI infrastructure, directly boosting corporate profits.

💰 Why It Matters

This signals a significant shift in global investment flows, directing capital towards dynamic, undervalued economies.

For investors, it means potential for higher returns in EM equities, especially in countries riding the tech and AI wave.

The expanding AI boom isn’t confined to a few giants; its economic benefits are set to uplift a wider range of companies across emerging markets.

The current valuation discount offers a compelling entry point compared to the pricier developed global markets.

👀 What to Watch Next

Investors should closely monitor corporate earnings, particularly from companies poised to benefit from AI, to confirm sustained growth.

Regional central bank policies will be crucial, as their decisions can either accelerate or dampen market momentum.

Keep an eye on how emerging economies maintain their resilience against persistent global supply-side shocks.

Be ready for potential market volatility, as rapid growth in the tech ecosystem can also bring more pronounced price swings.