Swisscanto week graphic. After years of underperformance, emerging markets seem to find momentum, carried by increasing profits and a weakened dollar.
The integration of China into the World Trade Organization (WTO) in 2001 marked a decisive turning point for emerging markets. This event has catalyzed an unprecedented phase of economic expansion, not only for China, but also for other emerging savings, often grouped under the acronym (Brazil, Russia, India and China). These countries have seen their financial markets attract massive flows of international capital, carried by high growth rates, rapid urbanization and sustained industrialization. This period was characterized by a significant outperformance of emerging markets compared to the developed markets.
However, this dynamic has gradually broke. Enterprises in the developed markets, especially in the United States, have benefited from the development of technological sectors and digital transformation, which has considerably strengthened their profitability. On the other hand, emerging companies, often concentrated in more cyclical sectors such as raw materials, energy or financial services, were more exposed to economic fluctuations and external shocks.
In addition, some emerging markets have been faced with structural challenges like China, which has seen its growth -based growth model and exports reach its limits. These elements contributed to a relative stagnation of profits from emerging companies, limiting their ability to compete with developed markets.
Beyond these structural elements, the US dollar plays a central role in the dynamics of emerging markets, an assessment of the dollar having historically exerted negative pressure on emerging markets. Indeed, a strong dollar increases the cost of the debt service for governments and companies in emerging markets that borrowed in foreign currencies. An assessment of the greenback is also frequently associated with higher yields in American assets, which tends to reduce capital flows to emerging markets.
Conversely, a low dollar tends to promote emerging markets, periods of depreciation of the dollar having historically coincided with outperformance phases of emerging indices compared to MSCI Monde, as was the case in the 2000s or 2017.
In this context and after four years of relative underperformance, marked by the domination of American actions and the strength of the dollar, investors wonder about a possible reversal of trend. The assets of the emerging markets tackle the second half of 2025 with a strong momentum, supported by a generalized weakening of the dollar, a globally decreasing inflation and optimistic expectations around the federal reserve policy. Consequently, and after persistent decrease revisions in recent years, the share forecasting index by action for emerging markets compared to developed markets is recently on the rise. Led by the solid performance of the sectors of semiconductors and domestic consumption, Asia is distinguished in particular in the face of other regions. In addition, the US dollar does not react as it would usually do in times of risk aversion and was actually weakened as a result of customs tariffs. Any additional strengthening of the currencies of emerging markets would support the positive momentum observed in these markets for the rest of the year.
