Emerging markets as an asset class have seen a strong rebound in 2025, with a few exceptions. This recovery has been fueled by attractive valuations, a weaker US dollar, and varied beneficiaries under a trade-focused US administration.
With Asia playing an increasingly pivotal role in global growth, this trend is expected to persist.
Exploring which emerging market exposures are most suitable is worthwhile, as leading companies are likely to arise from these regions. Global equity funds are also likely to see growing allocations to stocks like Taiwan Semi, Tencent, Alibaba, Samsung, SG Hynix, OTP Bank, Erste Bank, HDFC Bank, and Southern Copper Corporation.
Source: MSCI
The chart above examines YTD, 5-year and 10-year returns for individual emerging markets in USD terms.
Whilst YTD returns have been very strong, only a handful of markets have managed to achieve over 8% annualized returns over 10 years.
Upon closer inspection, it's interesting to note the key drivers of success. In many cases, a single stock, with a big weight in its index has significantly influenced a country's market returns. Taiwan Semiconductor (around 50% of Taiwan's market cap), Samsung Electronics (about 20% of South Korea's market cap), OTP Bank (roughly 40% of Hungary's market cap), and Kuwait Finance and National Bank of Kuwait (approximately 45% of Kuwait's market cap).
A great approach is to invest in an actively managed global fund with a flexible strategy that increases exposure to emerging market companies without being tied to a benchmark. This can be paired with satellite investments in single-country funds or ETFs focused on structural growth stories in countries like India and China.
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Mugunthan Siva is Managing Director of India Avenue, an Australian based boutique investment management company, domiciled in Sydney, with a presence and advisory network in India. He has over 30 years experience in Australia and is lead portfolio manager for the two long-only equity funds managed by the firm; the India Avenue Equity Fund and the India 2030 Fund.
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Mugunthan Siva is Managing Director of India Avenue, an Australian based boutique investment management company, domiciled in Sydney, with a presence and advisory network in India. He has over 30 years experience in Australia and is lead...
Mugunthan Siva is Managing Director of India Avenue, an Australian based boutique investment management company, domiciled in Sydney, with a presence and advisory network in India. He has over 30 years experience in Australia and is lead...