Emerging Markets Equities

A reported IPO prospectus from a private artificial-intelligence developer commits at least 518 billion dollars over roughly a decade to six infrastructure partners, with about 80 percent of it non-cancellable or payable regardless of usage. The reported allocation includes roughly 161.2 billion dollars to a custom-silicon supplier whose chips are fabricated and packaged in Taiwan using Korean memory, alongside 111.1 billion, 110 billion and 31.4 billion dollars to three cloud providers. The document reports revenue of nearly 4.6 billion dollars in 2025 against an operating loss of more than 8 billion, with nearly a quarter of that revenue drawn from two unnamed customers.

Why it matters here: Taiwan and Korea are the two strongest sleeves in this class, and this document is the reason their earnings visibility is unlike anything else in emerging markets. A non-cancellable order book stretching a decade is the strongest available answer to the objection that the AI cycle is a bubble in orders rather than a bubble in revenue, because the suppliers get paid whether or not the capacity is used.

Counterpoint: Concentration is the risk on both sides of the transaction: the buyer draws nearly a quarter of its revenue from two customers and is loss-making, while Korean chip exports have become so dominated by a single demand theme that the country now sends nearly half its exports in one product category. A single-customer capital cycle is a fragile foundation for two national equity markets.

The Reserve Bank of Australia's statement of 29 September, accompanying a unanimous increase in the cash rate to 4.60 per cent, said that growth in Australia's major trading partners has been stronger than expected because the boost from AI-related investment has outweighed the adverse effects of the Middle East conflict. The same statement said AI-related demand is driving rapid growth in global prices for technology-related goods.

Why it matters here: Australia's trading partners are overwhelmingly the Asian emerging markets in this class, so this is a central bank's formal assessment of exactly these economies, and the assessment is that the AI cycle is beating the war. It is the best macro endorsement available for the Taiwanese and Korean leadership of the sleeve, delivered by an institution with no interest in talking the theme up.

Counterpoint: The same statement warns that a period of prolonged uncertainty may cause growth to be lower overseas and that there are scenarios in which inflation is higher and activity lower than forecast. A backward-looking observation about trading-partner resilience is not a forecast.

The New York Fed president said on 29 September that there is no need for urgency on further increases, and separately that the AI boom has produced a race between available supply and surging demand in certain goods categories in which demand is winning, with those higher costs starting to affect other prices. He put current inflation at 3.7 percent and expects growth to average about 2.25 percent this year and next.

Why it matters here: For the two strongest sleeves in this class this is an unusually direct endorsement: a senior central bank official is describing the pricing power of AI hardware as an inflation problem, which is another way of saying the exporters are capturing rents. Combined with a delayed policy path that eases the dollar funding channel, it is a two-sided positive for a class that is normally a one-way bet on US rates.

Counterpoint: A central bank that identifies AI-related demand as a source of inflation it must suppress is describing a future in which it tightens against exactly this export cycle. Being named as an inflation driver is a policy risk, not only a validation.

Indirect US-Iran talks continued through Qatari mediators on 28 and 29 September, with the Iranian proposal offering to reopen the Strait of Hormuz within seven days of US compliance still under discussion and a US official describing the contacts as positive and constructive. Oil fell close to 2 percent on Tuesday, with WTI down 2.2 percent to about 90.71 dollars a barrel intraday.

Why it matters here: The Asian core of this class buys Gulf crude and sells manufactured goods, so the war has been a pure terms-of-trade tax on it, and India is the weakest large member of the sleeve as well as the most crude-sensitive, which is not a coincidence. A credible path out of the conflict reverses that tax through current accounts, currencies and manufacturing margins at once.

Counterpoint: Brazil and South Africa are commodity exporters for whom lower crude is a revenue loss, so the class is not uniformly long de-escalation. The sleeve's actual leadership is driven by AI memory demand that is largely indifferent to the oil price.

AMD said it was acquiring the artificial-intelligence firm World Labs for 8.2 billion dollars. The target was founded by the researcher Fei-Fei Li, who said that intelligent agents, whether robots, vehicles or tools, can learn inside rich, physics-aware digital worlds before being deployed into the real one, making them much safer.

Why it matters here: Every expansion of the model frontier by an accelerator vendor eventually arrives as a wafer order in Taiwan and a memory order in Korea, because the vendor does not own fabrication. The transaction is therefore a forward indicator of demand for this class's leading sleeves rather than a current one.

Counterpoint: The link from a research acquisition to wafer volumes is speculative and multi-year, and the acquirer's existing order book already reflects its published roadmap. This is sentiment rather than order flow.

The US Energy Department said on 29 September it was offering to loan energy companies up to 40 million barrels of crude from the Strategic Petroleum Reserve, the last tranche of the 172 million barrel drawdown ordered in March, with bids due by 6 October. The March release was agreed alongside other members of the International Energy Agency, whose 32 members committed to a coordinated release of 400 million barrels after the closure of the Strait of Hormuz, and further European releases are now under discussion.

Why it matters here: Emerging importers are the largest net beneficiaries of coordinated reserve action because they buy crude in dollars and hold no strategic buffers of comparable size. Every barrel released is a transfer from producer economies to importer economies, and the importers are the Asian core of this class.

Counterpoint: The commodity exporters inside this class lose revenue as prices fall, and none of these economies is a member of the agency coordinating the release, so the benefit is diffuse and unearned. The class's leadership is driven by semiconductors rather than by oil.

Meta unveiled Muse for Small Business on 29 September, connecting its AI agent to software from Asana, Zoom, Intuit, Box, Canva and Slack, and allowing links to advertising accounts and professional social profiles. The company gave no pricing detail but referred to the existing app, which is free with usage limits and available on subscription beyond that.

Why it matters here: Agent products running continuously against business software are an inference workload rather than a training workload, and inference is where memory bandwidth binds. That is the specific bottleneck the Korean and Taiwanese suppliers own, which is why a product launch registers at all for this class.

Counterpoint: A single launch with undisclosed pricing does not measurably move semiconductor demand, and the inference silicon for a consumer-scale agent may run on existing installed capacity. The channel is directionally right but quantitatively negligible.

Semiconductors made up nearly half of South Korea's exports in the first twenty days of September, while China and Hong Kong combined accounted for more than half of the country's chip shipments in August. The figures were reported by a specialist semiconductor industry publication on 29 September.

Why it matters here: This is the macro version of the AI capital-spending story and it explains the positive lean on an otherwise mixed class. A national export base approaching half semiconductors, at a moment when the largest AI buyer has committed at least 518 billion dollars of mostly non-cancellable compute spending, is a rare combination of scale and visibility for an emerging equity market.

Counterpoint: Concentration of this degree is a fragility rather than a strength, and the destination concentration makes it worse: more than half of those chips go to one destination bloc, exposing the entire export base to export controls, tariffs or a demand slowdown there. A single-product, single-destination economy is one policy decision away from a shock.

Shipping-flow data reported in the early hours of 29 September showed Middle East crude exports rebounding in September to around their highest level since the war began in February, with Saudi flows through Hormuz rising to about 2.9 million barrels a day from roughly 700,000 in August and the kingdom's East-West pipeline restarted. Total clearance through the strait was measured at 10,591 thousand barrels a day on 26 September against a pre-war baseline of 17,133.

Why it matters here: For the importing economies in this class the volume of available crude matters as much as the price, because physical scarcity forces expensive substitution and rationing on top of the headline cost. Restored Gulf flows reduce both, and they do so without requiring any political settlement.

Counterpoint: Brazil and South Africa are commodity exporters that lose from lower energy prices, and the sleeve's leadership is driven by AI memory demand indifferent to oil, so the mechanism is partially offsetting within the class.

China's State Council pledged on 29 September to step up counter-cyclical policy support to address rising economic strains and vowed to roll out measures to stabilise the property market. Real estate developers led onshore gains, with Vanke shares up 10 percent, and analysts expect policymakers to broaden the use of housing provident funds to reduce weighted-average mortgage rates and more large cities to introduce local housing easing measures.

Why it matters here: Chinese property construction is the marginal buyer of iron ore, copper and bulk commodities, so a credible stabilisation package is a revenue signal for the commodity-exporting emerging markets, which are the weakest part of this sleeve. It is one of the few channels available that lifts the laggards rather than the leaders.

Counterpoint: Chinese property stimulus in this cycle has consistently focused on completion and inventory absorption rather than on new construction starts, which is far less commodity-intensive. A pledge with no named instruments offers commodity exporters nothing concrete.

Three-month copper held above 14,400 dollars a tonne in London on 29 September, rising 0.2 percent to 14,446 dollars, up about 9 percent in September for a third consecutive monthly gain after reaching a record 14,875 dollars earlier in the month. Study-group data show July mine production at an annualised 23 million tonnes, down 4 percent from June, with refined demand at an annualised 29 million tonnes against supply of 28.4 million.

Why it matters here: For the commodity-exporting half of this class, copper at these levels is the offset to the precious-metals damage. It is a terms-of-trade gain that flows through to export revenue, fiscal receipts and the earnings of listed mining companies in the weaker country sleeves.

Counterpoint: The largest copper exposure sits in Chile and Peru, neither of which is a direct index member here, while the strike and safety disruptions hit exactly those producers. Higher prices caused by lost production do not benefit the companies losing the production.

The US administration is again weighing a ban on diesel exports, days after distancing itself from an earlier version of the plan, with retail diesel prices hovering near a record high of 6.53 dollars a gallon. Analysis cited in the reporting estimates that an outright ban would keep roughly 1.2 million barrels a day of product at home and risks overwhelming Gulf Coast storage.

Why it matters here: Withdrawing more than a million barrels a day of American diesel from the seaborne market would leave Europe short and hand pricing power to the Asian refiners that already supply it at the margin. That is a straightforward refining-margin windfall for the Indian and Korean sleeves of this class.

Counterpoint: Indian refiners' advantage rests partly on discounted sanctioned crude whose availability would change in a normalising market, and Korean refining margins are already elevated. A policy that spikes European product prices also invites European intervention that could cap the windfall.

Crude reversed a two-day advance on 29 September. Having opened the session with Brent for November delivery up 1.22 percent at 106.56 dollars a barrel and WTI above 93.57, WTI was trading 2.2 percent lower at about 90.71 dollars by the US morning, with the pullback attributed to signs of better oil flows from the Middle East and to the reported indirect talks.

Why it matters here: The Asian core of this class runs a structural energy deficit and pays for it in dollars, so every fall in crude is a direct improvement in current accounts, currencies and manufacturing margins within the same quarter. India, the weakest large member, is the most crude-sensitive of them.

Counterpoint: Brazil and South Africa lose revenue as energy prices fall, so the class is not uniformly long cheaper oil, and the sleeves actually driving its performance are selling AI hardware whose demand is indifferent to the crude price.

An investor known for bearish calls said he is moving his artificial-intelligence bubble timeline forward and switching to put options on key AI stocks, citing exceptionally tight volatility measures that make leveraged downside protection cheap.

Why it matters here: If the AI trade unwinds, it unwinds hardest where the exposure is most concentrated and the extension greatest, and the Taiwanese and Korean sleeves are the two most stretched large positions in this universe on distance from their long-term averages. For this class the risk is positioning rather than fundamentals, because the same sleeves carry the contractual order book.

Counterpoint: Both markets are supported by contracted order books rather than by sentiment: a build-out of at least 518 billion dollars with about 80 percent non-cancellable terms is not a positioning story. Extension above a moving average during an earnings upcycle is not the same thing as overvaluation.

The Bureau of Labor Statistics reported job openings little changed at 7.1 million in August against a market consensus of 7.24 million, with the openings rate at 4.3 percent, hires little changed at 5.2 million and total separations unchanged at 5.1 million. Quits were unchanged at 3.1 million for a rate of 1.9 percent, and job openings changed little in all industries.

Why it matters here: Indian information-technology services and other emerging-market outsourcing revenue is a direct function of the pace of Western corporate hiring, and this release shows that hiring has stopped growing. The channel runs through contract renewals and headcount-linked billing rather than through export volumes, which makes it specific to the services-heavy sleeves of this class.

Counterpoint: The AI capital cycle is substituting capital for labour in exactly the categories where hiring has stalled, and the emerging-market beneficiaries of that substitution are the leaders of this class. A frozen US labour market may be a positive signal for their order books.

Spot silver fell 5.41 percent to 60.81 dollars an ounce on 28 September, its lowest close since 4 August, and made a fresh low of 60.63 dollars on 29 September before recovering during the session. Spot gold fell 3.71 percent to 4,127 dollars an ounce over the same session as the 10-year real yield rose to 2.90 percent and the dollar index gained 0.22 percent.

Why it matters here: Precious-metal producers price their revenue in dollars and part of their costs in local currency, so a fall of this size against a firmer dollar squeezes margins even after the currency offset. For the resource-heavy Latin American and South African sleeves of this class it is a direct earnings event rather than a sentiment one.

Counterpoint: Local-currency depreciation cushions dollar revenue declines materially, and the industrial metals matter more to the largest producers in this class than the precious metals do, with copper up about 9 percent on the month.

Chile's National Geology and Mining Service confirmed a fatality at BHP's Escondida mine on 23 September and ordered the immediate deployment of its regional team, after which BHP suspended all operational activities without giving a restart timeline. Under local procedures operations cannot resume until inspectors confirm the site is safe, so the regulator rather than the operator controls the timeline. Separately, workers in two unions at Antofagasta's Centinela mine rejected the company's final contract offer, opening a mandatory mediation period.

Why it matters here: Two simultaneous labour and safety disruptions at major Chilean copper mines, with restart timing in a regulator's hands, is a reminder that the region's mining supply is politically and operationally fragile. That raises the discount applied to regional mining assets in this class even as the metal price rises.

Counterpoint: Neither Chile nor Peru is a direct index member here, so the exposure is indirect, and a regulator that enforces safety standards rigorously reduces long-run operating risk rather than raising it.

US Treasury bill auction rates rose across all maturities week on week, with the 52-week clearing at 4.400 percent, the 26-week at 4.285 percent against 4.155 percent a week earlier, and the 17-week at 4.135 percent against 4.030 percent. All of those sit above the 4 percent policy-rate ceiling.

Why it matters here: Emerging-market equity and debt allocations are funded out of dollar cash, and dollar cash just improved across the curve. A money market pricing a terminal rate above the current policy ceiling is a money market telling allocators to wait, which is the classic mechanism of an emerging-market outflow.

Counterpoint: This class carries a positive lean precisely because its leadership is an AI export cycle with earnings visibility that no bill yield competes with, and dollar cash has yielded above 4 percent for most of three years without preventing that. Local-currency real yields in several of these markets remain far above the dollar alternative.

The Bank of Japan raised its policy rate to 1.25 percent on 18 September, the highest since 1995, with the cycle accelerating to three-month intervals from six, in a 7 to 2 decision. The yen traded near 156.64 to the dollar after the decision.

Why it matters here: High-carry emerging currencies are financed in the cheapest available funding currency, and that has been the yen for a generation. Each increase in the Japanese policy rate narrows the carry and raises the risk of a disorderly unwind in exactly the highest-yielding sleeves of this class, which are the Brazilian and South African ones.

Counterpoint: The yen has continued weakening through the hiking cycle, which sustains rather than threatens the carry trade, and at 1.25 percent the funding cost remains trivially low against Brazilian or South African policy rates. The unwind risk is a tail rather than a base case.

The Bank of Japan's Services Producer Price Index for August 2026, released on 28 September, rose 3.7 percent from a year earlier, the fastest annual pace since June 2024, with transport and postal services contributing around 1.1 percentage points and ocean freight prices up around 74 percent from a year earlier. Excluding international transportation the index rose 3.2 percent, unchanged from July.

Why it matters here: Emerging-market growth is a seaborne trade model, and the cost of moving a container or a bulk cargo has risen by roughly three quarters in a year on an independent central bank's own index. That is a transfer of margin from exporters in this class to shipowners, and it is invisible in the headline inflation data these markets are usually judged by.

Counterpoint: Freight is a small share of value for the high-value semiconductor exports that actually drive this class's performance, and much of it is contracted rather than spot. Recovering Gulf exports and falling European product prices point to the beginning of an unwind.

The European Central Bank's Governing Council raised its three key rates by 25 basis points with effect from 16 September, taking the deposit facility to 2.50 percent, the main refinancing rate to 2.65 percent and the marginal lending facility to 2.90 percent. It said inflation is set to remain well above target for an extended period, revised its 2027 and 2028 inflation projections up from June, and confirmed that its asset purchase portfolios are declining at a measured and predictable pace.

Why it matters here: Emerging markets can usually find a funding source when one major central bank tightens. When both the dollar and the euro blocs tighten together, and both are running down balance sheets, that optionality disappears, and it is the optionality rather than the level that has historically protected this class.

Counterpoint: The euro-area policy rate at 2.50 percent is a fraction of the US level and is not restrictive in real terms, so its marginal effect on global liquidity is small. Euro weakness against the dollar has historically been the larger channel and it cuts the other way.

JPMorgan downgraded the Chinese electric vehicle maker XPeng to neutral from overweight on 29 September, saying it is cautious on the China auto sector's performance and expects weakness in the second half of this year and continued structural challenges into 2027 including weak demand and higher input costs. The shares fell 4.2 percent to a 52-week low of 9.51 dollars.

Why it matters here: Chinese producers facing weak domestic demand export their surplus, and that pricing pressure lands on Korean and other emerging-market vehicle manufacturers competing in third markets. The channel is competitive rather than financial, which is why it registers modestly.

Counterpoint: Korean auto earnings are dominated by North American volumes and product mix rather than by Chinese competition in third markets, and Korea's equity story is currently about memory rather than vehicles. The channel is weak.

Shein reported a 66.6 percent year-on-year fall in second-quarter adjusted net income to 228 million dollars, with net revenue up just 0.9 percent to 11.1 billion dollars even as total orders rose 7.6 percent. The company attributed the squeeze primarily to a spike in oil prices and freight rates amid Middle East tensions and said it chose to absorb those costs rather than pass them to consumers. Its shares fell more than 11 percent on 29 September.

Why it matters here: Every emerging-market exporter ships through the same disrupted sea lanes and sells into the same price-sensitive Western consumer. This result is the clearest available quantification of what that costs, and it suggests the earnings damage from the war across this class is larger than index-level estimates reflect.

Counterpoint: The leading emerging-market exporters in this class ship high-value, low-weight semiconductors for which freight is a trivial share of cost, so the read-across applies to bulk consumer goods rather than to the sectors driving the class's performance.

The Conference Board Consumer Confidence Index fell 6.7 points to 81.9 in September from 88.6 in August, a third consecutive monthly decline, against a consensus looking for an increase to 89. The Present Situation Index fell to 109.3 and the Expectations Index to 63.6, consumer appraisals of current business conditions turned negative for the first time since September 2024, and the labour market differential narrowed to plus 1.7 percentage points.

Why it matters here: Emerging-market equity earnings are a levered claim on developed-world final demand, and the US household is its largest single component. The channel is slow but it is the mechanism by which a domestic sentiment shock eventually shows up in Asian and Latin American export volumes, and the present-situation collapse means the weakness is being felt now rather than merely feared.

Counterpoint: The strongest sleeves in this class are selling into corporate AI capital spending rather than into US households, and their export growth dwarfs any plausible consumer drag. The mechanism barely touches the part of the class that is driving its score.

The 30-year US Treasury yield reached 5.613 percent intraday on 29 September, the highest since June 2002, with the par curve at 5.59 percent for the 30-year and 5.64 percent for the 20-year, while the 10-year closed the curve at 5.26 percent and the 2-year at 4.89 percent. The front end was broadly unchanged, so the curve steepened, with investors demanding more term premium on fiscal and supply grounds rather than repricing the near-term policy path.

Why it matters here: Emerging markets are the classic recipient of a US term-premium shock, because a higher risk-free yield raises the hurdle rate for the whole asset class and tightens the dollar liquidity that funds it. The damage lands unevenly here, concentrated in the high-multiple and externally financed names rather than in the chip exporters.

Counterpoint: The two largest positive contributors in this sleeve are levered to an AI capital cycle whose financing has just been underwritten by a record private infrastructure commitment, so for them the growth impulse plausibly dominates the discount-rate drag. That is why the class carries a positive lean into the day.

The Federal Open Market Committee raised the target range for the federal funds rate to 3.75 to 4 percent on 16 September by a 12 to 0 vote, its first increase since 2023, and by 29 September markets priced a more than 72 percent chance of a further increase at the October meeting against 70.9 percent previously. The New York Fed president noted that twelve of eighteen participants favoured just one further increase before the end of the year.

Why it matters here: A tightening dollar cycle is the textbook emerging-market headwind, operating through currencies, external debt service and portfolio flows at the same time. It is the heaviest single adverse force in this file because it reaches every country sleeve rather than a sector, and it does so without any domestic policy offset available.

Counterpoint: This class carries a positive lean precisely because its leadership is driven by an AI export cycle largely indifferent to the dollar funding channel. A tightening cycle delivered because US growth is strong is also a demand tailwind for exporters.