Written by Ilaria Massei
Geopolitical turbulence has tested Emerging Markets’ resilience on both the equity and fixed income sides.
Last week, the MSCI Emerging Markets Index closed up +1.4% and the MSCI All Countries Asia Pacific ex-Japan Index, which has greater exposure to countries like Korea and Taiwan, was up +1.8%. Digging deeper into what drove those returns, the answer lies in a strong set of Q1 2026 earnings results from companies at the heart of the Artificial Intelligence (AI) revolution. TSMC, representing nearly 60% of the Taiwan index, delivered revenue growth of 35% with profit up 58%, also raising its full year guidance. In Korea, Samsung and SK Hynix together account for over 50% of the Korean index – SK Hynix posted very strong quarterly results, and Samsung is expected to follow with its own strong Q1 results on Wednesday. All three companies sit at the heart of the global AI infrastructure buildout – TSMC manufactures the chips, Samsung and Hynix provide the memory that powers every AI server – and all benefit from massively increased AI-related spending by groups such as Microsoft, Meta and Google. Overall, AI capital expenditure is still very strong and these dominant Emerging Market players are key beneficiaries.
Beneath the headlines, and equally important, Emerging Markets local currency bonds – government bonds issued by developing countries in their own currency – quietly held their ground throughout the volatility. Prices stabilised, currencies rebounded, and the fundamental investment case remains intact. Emerging Markets economies entered this period in far stronger financial health than previous shocks – with higher foreign exchange reserves, sounder monetary frameworks and deeper local capital markets. The Bloomberg EM Local FX Gov 10% Country Cap Index – the Emerging Markets local bond index – rebounded strongly through April, up +1.4%.
In the UK, the week was dominated by political turbulence surrounding Prime Minister Keir Starmer – facing calls to resign over the Mandelson security scandal – while on the economic data front, annual inflation rose to 3.3% in March, up from 3% in the previous two months and in line with expectations. The increase was driven in part by transport costs, which rose 4.7%, largely reflecting the impact of higher fuel prices from the conflict. Motor fuels, in particular, climbed by 4.9%, making the largest upward contribution. The cost of the conflict began feeding into economic data and weighing on UK equities as the FTSE All Share declined -2.6% last week.
While energy shocks create short-term uncertainty, parts of the market continue to offer long-term opportunities. Against this backdrop, a well-diversified portfolio is well positioned to capture opportunities across geographies and asset classes as the broader economic picture gradually clarifies.
All performance figures are stated in Sterling terms, unless otherwise specified.
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