The term “emerging markets” originated in the 1980s and was intended to distinguish emerging economies from the established industrial nations. For many years, emerging markets typically shared relatively homogeneous characteristics, such as increasing levels of industrialisation, younger populations, rising urbanisation and, as a particularly characteristic feature, faster or stronger earnings growth than in the established industrialised nations. However, it is now time to consider the structural changes taking place in emerging markets. These developments should lead investors to recognise the increasing differentiation within the emerging-market space and to acknowledge that it is less homogeneous than in the past. As a result, it may be more difficult to use emerging markets as a simple source of diversification relative to other equity and bond markets, particularly in light of the changes in sector and country weightings.

Fundamental factors have also changed since the 1980s and 1990s. Whereas emerging markets were often heavily indebted during those decades, many have since made great strides in this respect and have become less fiscally vulnerable than in the past. In particular, levels of indebtedness vis-à-vis industrialised nations have fallen considerably, as has the general dependence on US-dollar financing. Moreover, current account deficits have narrowed or have even been eliminated altogether, a fundamental improvement that is especially apparent in North Asia. A further fundamental change has been the improvement and increase in emerging markets’ currency reserves, whereas currency crises were a frequent occurrence during the 1990s.

This development is also linked to improvements in inflation dynamics. Following the supply-chain disruptions caused by the COVID-19 crisis, emerging-market central banks began raising key interest rates more rapidly than those in industrialised nations. As a result, emerging-market central banks were able to reduce inflation and now have additional scope for interest-rate cuts, particularly in Latin America. 

In Asia, by contrast, we are witnessing a positive shift towards stronger earnings growth, as North Asia develops into a globally important centre for the artificial intelligence ecosystem.  Emerging markets have become indispensable, particularly in the area of semiconductors (Taiwan, South Korea) and among hyperscaler companies involved in language models and software, as demonstrated by the launch of DeepSeek in China.

It should not be forgotten that China is a global leader in rare earths, which are crucial to the technology and electronics industries, as well as in robotics, sensors and battery manufacturing. Latin America, meanwhile, can leverage its vast resources of raw materials that are also in demand within the artificial intelligence ecosystem, for example globally important metals such as copper. In addition, Latin America is benefiting from efforts by the US to reduce its dependence on China and to relocate the production of industrial goods and supply-chain components away from Asia and towards geographically closer countries, a trend referred to as reshoring or friendshoring. Countries such as Mexico and Brazil stand to profit from these developments.

The structural changes taking place in emerging markets therefore create not only opportunities but also risks. Particular attention must be paid to the increased concentration of the technology sector within emerging-market equity markets, especially in South Korea and Taiwan. Technology now accounts for around 40% of the MSCI Emerging Markets Index, a weighting similar to that of the S&P 500 in the US.

Contact a client advisor for more information.

_{This publication is intended for information and marketing purposes only, and is not geared to the conclusion of a contract. It only contains the market and investment commentaries of Maerki Baumann & Co. Ltd. and an assessment of selected financial instruments. Consequently, this publication does not constitute investment advice or a specific individual investment recommendation, and is not an offer for the purchase or sale of investment instruments. The future performance of investments cannot be inferred from past price performance. In other words, the value of investments may increase but may also decrease, and the investor may be required to make additional payments for certain products. In certain circumstances, figures may refer to reporting periods of less than five years, which could reduce their validity. Predictions for the future are always non-binding assumptions. Figures presented in foreign currencies are also subject to exchange rate fluctuations, which can affect their performance. The information in this publication is in no way to be understood as an assurance of future performance. Maerki Baumann & Co. Ltd. does not provide legal or tax advice. In addition, Maerki Baumann & Co. Ltd. accepts no liability whatsoever for the content of this document; in particular, it does not accept any liability for losses of any kind, whether direct, indirect or incidental, which may be incurred as a result of using the information contained in this document and/or arising from the risks inherent in the financial markets.}

_{*Please note that due to German regulatory requirements we are unable to provide the services (crypto focus module) named in this brochure to our clients domiciled in Germany. The real estate focus module is only available to qualified clients domiciled in Switzerland.}

Editorial deadline: 18 August 2026

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