India and EM are winners of the rerouting shift

We maintain a positive outlook on emerging market (EM) equities for H2 2025, driven by recovering macro momentum, stabilising inflation, and central banks on an easing path. While growth remains positive and earnings decelerate to low single digits, the key narrative is the fading US exceptionalism, highlighted by a weakening dollar and declining trust in US policy, which enhances the attractiveness of EM through repatriation and diversification flows.

India and EM are winners of the rerouting shift

The pending sectoral tariffs present risks, but they also fuel localised supply chain initiatives that benefit EM.

We favour selective positioning in domestically-orientated sectors across regions: Turkey and South Africa offer compelling domestic consumption plays in retail and automotive, while undervalued Asian markets like South Korea, Indonesia, and Philippines present opportunities, with the latter two backed by young demographics and expanding middle classes. Commodity price stabilisation limits support for Latam exporters, reinforcing our preference for domestic industries that benefit from reduced foreign competition.

The rerouting of global supply chains continues to shape EM dynamics, where India and ASEAN emerge as key beneficiaries. India’s manufacturing push through initiatives like “Make in India” attracts multinational corporations, particularly in defense, IT services, and consumer goods. ASEAN economies benefit from their strategic ties with US and expanding middle-class consumption. Meanwhile, Turkey and Mexico’s strategic locations have kept them as re-routing hotspots.

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