A narrow EM rally looks for a second wind

Ninety One expects a broader set of sectors to underpin future returns. "A much greater contribution is expected from consumer discretionary, industrials and financials," its portfolio managers wrote.

UBS strategists Xingchen Yu and Laura Smith also make the case that the earnings base is starting to widen, pointing to improving manufacturing activity, stable global demand and resilient domestic economies as factors supporting earnings upgrades in industrials, financials and other cyclical sectors.

Excluding Taiwan and South Korea, where AI-related earnings growth is most pronounced, UBS expects emerging-market earnings to expand by 17% in 2026 and 12% in 2027.

"In our view, this is an important development, suggesting that earnings growth is becoming more diversified across regions and industries rather than relying primarily on AI hardware beneficiaries," the UBS strategists said.