UBS has reiterated a constructive outlook on emerging market equities, maintaining an MSCI Emerging Markets index target of 1,720 for December 2026. The bank's stance remained unchanged despite recent volatility linked to geopolitical friction and higher oil prices.
This month UBS upgraded South Korea to an "attractive" market after a near 20% correction. The bank characterizes that correction as the result of technical unwinds rather than a sign of weakening corporate or macro fundamentals.
UBS highlighted strong earnings momentum in South Korea's memory and broader semiconductor industries. The bank said elevated prices for DRAM and NAND, together with ongoing supply shortfalls, are supporting profitability in the sector.
Looking beyond immediate dynamics, UBS expects the cyclical upturn in these technology segments to persist into 2027. The bank cites robust export figures and a set of "value up" initiatives designed to lift market appeal. Among those measures are new rules affecting the retirement or cancellation of treasury shares, which UBS says are likely to encourage better shareholder returns.
UBS kept intact its forecast for 29% earnings per share growth across emerging markets in 2026. That projection underpins the bank's view that the MSCI Emerging Markets index has low- to mid-teens upside by the end of the year. UBS also observed that, historically, geopolitical shocks tend to be short-lived unless they trigger a fundamental change in the economic backdrop.
On China, UBS maintained its preference for mainland equities and the technology sector. The bank noted that the March National Peoples Congress reinforced a pragmatic policy orientation with emphasis on technology, innovation and mobilizing long-term capital to back strategic industries. UBS sees room for selective upward earnings revisions, particularly in sectors that receive policy support.
In India, where equities have lagged regional peers so far in 2026, UBS pointed to solid bank earnings as support for a double-digit earnings recovery. The bank also sees potential for a rebound in IT services as implementation benefits accumulate over coming quarters, while noting ongoing investor concerns about disruption from artificial intelligence.
UBS reiterated its preference for Brazilian equities, citing firm fundamentals and the prospect of monetary easing. The bank said anticipated rate cuts should ease financial conditions and could prompt a shift of investor funds from bonds into equities.
Preferences for Indonesia and Malaysia were also maintained. For investors seeking broad regional and sector diversification, UBS recommended exposure via the MSCI Emerging Markets benchmark.
Implications for markets and sectors
- Semiconductors and memory manufacturers - supported by strong pricing and supply constraints.
- Technology sectors in China - potential for selective earnings upgrades linked to policy emphasis on innovation.
- Banking and IT services in India - banks underpin a recovery; IT services could rebound as implementation gains momentum despite AI concerns.
- Brazilian equities - may benefit from easing monetary policy and portfolio rotation from fixed income.
Conclusion
UBS's latest position leaves its structural bullish case on emerging markets unchanged. The bank combines projected earnings growth with targeted country and sector preferences, while pointing to corporate governance reforms and export strength as catalysts for continued momentum, particularly in South Korea's tech-heavy export complex.