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UBS forecasts a strong performance for emerging market (EM) and Asia ex-Japan equities in 2026, projecting “bumper” returns fueled by robust technology and artificial intelligence (AI) growth. The Swiss bank expects about a 9% upside for the MSCI Emerging Markets Index and 11% for the Asia ex-Japan benchmark, citing favorable earnings growth and stable macroeconomic conditions. UBS predicts emerging market earnings per share (EPS) to expand around 15% annually through 2026, supported by corporate investment and easing interest rates.
UBS noted that the global “AI trade” remains in its early stages, with technology-driven companies continuing to lead market gains. Roughly 23% of the EM index now consists of AI-related stocks, responsible for over 40% of the sector’s 2025 returns. These companies are forecast to deliver more than 20% EPS growth in 2026 before moderating the following year. UBS highlighted Chinese AI firms as particularly attractive compared to Korean and Taiwanese peers, citing lower valuations and stronger consumer-driven demand.
Strategists also emphasized investment themes such as AI-linked revenue growth, reduced tariff risks, and beneficiaries of falling energy prices. They advised focusing on companies with strong fundamentals and improving analyst sentiment. Regionally, UBS maintained an overweight stance on China, neutral ratings on Taiwan and Korea, and an underweight on India. Mexico was upgraded to Neutral amid solid foreign investment and consumption, while Thailand was downgraded to Underweight due to weak growth. The Philippines also saw a cut to Neutral amid policy uncertainties.
UBS described 2026 as shaping up to be a “normal” macro environment marked by stable yields, supportive central banks, and modest global recovery. With a steady U.S. dollar limiting currency gains, emerging markets are expected to post moderate yet sustainable returns even as U.S. equities regain leadership.
