Deglobalization is not only a risk but is creating new beneficiaries thanks to the rise of nearshoring, with Latin America and India among the main winners.
Mexico, in particular, emerges as one of the biggest beneficiaries due to its proximity to the United States and its role in low- and medium-value-added manufacturing. India is also benefiting from the diversification of supply chains away from China, although it has not yet attracted the same level of advanced manufacturing present in Korea or Taiwan.
Latin America is well positioned for the next cycle
Latin America is one of the main potential beneficiaries of a new positive cycle for emerging markets. Historically, the region tends to perform well in a context of a weakening US dollar, favored by stronger currencies and exposure to commodities.
Moreover, several supportive factors are converging: exposure to commodities, the importance of copper and other strategic materials, better alignment with US supply chains, and the nearshoring phenomenon. Brazil also presents an interesting risk/reward profile despite political uncertainty and continues to offer numerous investment opportunities in the region.
The performance of emerging markets may still have room for growth. One reason is that a weaker dollar has historically favored emerging market equities. Another is the growing focus, in some emerging countries, on shareholder-friendly reforms and discipline in capital remuneration.
Furthermore, investors need to reconsider some established beliefs about US exceptionalism. Since emerging markets are set to contribute significantly to future global growth and many institutions remain underweight or completely absent from these markets, there is a strong case for greater attention to this asset class.
Financialization and financial inclusion
Financialization remains one of the most underestimated structural themes in emerging markets, supported by low levels of financial services penetration and increasing access to banking and financial services. Technology is accelerating this trend, enabling financial institutions to reach previously excluded populations, particularly in regions like Latin America. Improvements in digital onboarding, credit assessment, and data usage allow leading banks to expand lending while maintaining rigorous risk standards.
This supports both economic development and business growth, making financial inclusion a multi-year investment opportunity in emerging markets.
South Korea’s ambition: becoming a developed market
South Korea is positioning itself for a possible reclassification as a developed market, supported by strong economic fundamentals and a high GDP per capita. A central element of this path is the government’s “Value-Up” program, which aims to improve corporate governance, transparency, and shareholder returns, reducing the traditional “Korea discount.” Although reclassification could attract additional global capital, it might also reduce Korea’s weight in emerging market indices. More broadly, the market is undergoing structural improvement supported both by reforms and the continued strength of the technology sector.
The AI driver
Artificial intelligence is currently the main driver of emerging markets, especially through South Korea and Taiwan, which sit at the center of the global AI supply chain. Companies active in semiconductors, memory, and chip manufacturing have recorded significant gains thanks to the surge in demand from large US hyperscalers.
This has created a mirror dynamic to that observed in the US with the “Magnificent Seven”: emerging markets are increasingly driven by a small number of large technology companies. South Korea’s exposure is concentrated in memory producers such as Samsung and Hynix, while the Taiwanese market is strongly influenced by TSMC and other semiconductor-related companies.
Emerging markets have become unusually concentrated, to the point where a small group of companies now represents a disproportionate share of benchmark indices. TSMC, Samsung, and Hynix together account for over a quarter of the emerging markets index, making concentration a relevant theme for active managers.
China’s push towards self-sufficiency
China is increasingly focused on achieving self-sufficiency in key sectors, particularly technology, semiconductors, and advanced manufacturing. This shift is driven by geopolitical tensions and restrictions on access to foreign technologies, which are accelerating domestic innovation and investment. As a result, China is moving up the value chain, shifting from a growth model driven by manufacturing to one more oriented towards innovation, with significant implications both for domestic companies and global supply chains.
