JPMorgan Overweights EM Citing 12x P/E, AI Upside and China Recovery
JPM•JPMorgan projects emerging market equities to rally in the second half, driven by a 12x forward P/E valuation, a likely reversal in hawkish central bank policies and early Chinese growth signals. The note highlights cheaper AI plays and semiconductor memory chip fundamentals underpinned by tight supply outlooks.
1. Overweight Stance and Valuation Gap
JPMorgan maintains an overweight position on emerging markets versus developed markets, pointing to a forward P/E of just 12x in EM compared with significantly higher ratios in DM. This historic valuation gap is seen as a compelling entry point for institutional investors.
2. AI Trade Expansion and Semiconductor Fundamentals
The bank underscores emerging markets’ AI plays as cheaper yet high-upside alternatives to megacap tech stocks, with a particular focus on memory chips. Supply additions aren’t expected until H2 next year, suggesting current fundamentals will continue to support the rally.
3. Macroeconomic Tailwinds and China Recovery
A projected easing of hawkish central bank stances and a softening U.S. dollar—trading at a 10%–15% premium—should provide a tailwind for EM assets. Early ‘green shoots’ in China and the upcoming U.S.-China summit could further accelerate capital inflows.
