Emerging Markets: Finding Value Beyond the Headlines — Update 5

The Opportunity

Emerging market equities are trading at their widest valuation discount to developed markets in over two decades. The MSCI Emerging Markets Index trades at 10.8x forward earnings, compared to 18.2x for the MSCI World — a discount of approximately 40%.

While headline risks remain (China, geopolitics, currency volatility), we believe the current pricing more than compensates for these concerns in select markets.

Where We're Investing

India

India remains our highest-conviction emerging market allocation. The structural growth story is well understood, but we continue to find mispriced opportunities in:

• Private sector banks — credit growth of 15%+ with improving asset quality
• Infrastructure — benefiting from the largest public capex cycle in the country's history
• IT services — cost-competitive global delivery with margin expansion potential

Brazil

After a difficult 2024, Brazilian equities are pricing in an excessively pessimistic scenario. The Bovespa trades at 7.5x forward earnings — well below historical averages. We are selectively adding to:

• Commodity exporters — low-cost producers with strong balance sheets
• Consumer staples — pricing power in an inflationary environment

Vietnam

Vietnam is emerging as a key beneficiary of supply chain diversification away from China. Manufacturing FDI inflows reached $23 billion in 2025, up 18% year-over-year. We are gaining exposure through listed industrial park developers and consumer brands.

We deliberately avoid countries where the rule of law and property rights are deteriorating. No amount of cheapness justifies capital allocation to jurisdictions where investor protections are being eroded.