The most compelling aspect is not the record itself, but the story it tells. Since the beginning of 2025, the MSCI EM has outperformed the MSCI World, rising by 53% compared to 25%. This lead raises a simple question: are we witnessing a broad-based return of emerging markets, or the rise of a more targeted engine?
Source: MarketScreener
An Index with a New Face
For a long time, emerging markets were primarily analyzed through a few variables: China, commodities, currencies, and the dollar. These benchmarks still matter, but they are no longer sufficient to explain what is driving the index today.
The MSCI EM remains a large basket, with over 1,200 stocks and nearly $11,700bn in aggregate market capitalization. However, among its largest caps, the contrast since January 1 is stark: Aramco is up about 16%, Tencent has fallen 21%, while semiconductor heavyweights are soaring, from TSMC (+46%) to Samsung (+93%) and SK Hynix (+122%).
The movement is not uniform across all emerging markets. It bears the distinct signature of North Asia. TSMC is capitalizing on its dominance in advanced chips. Samsung and SK Hynix are benefiting from the tightening memory market, particularly HBM, which has become a critical building block for AI accelerators and data centers.
Source: MarketScreenerr
The heatmap illustrates this clearly. The basket remains diversified across technology, financials, energy, industrials, and materials. However, the momentum is coming from the industrial upstream of AI: foundries, memory, equipment, and infrastructure providers.
Cheaper, and Not by Accident
This is where the valuation gap with the MSCI World becomes interesting. According to MSCI, the emerging index trades at around 16x earnings, compared to approximately 22x for the world index. It therefore offers access to a portion of the global technology cycle at a lower valuation.
But the discount should not be read as an anomaly. It aligns with the usual risks associated with emerging markets: China, currencies, governance, and Asian geopolitics. It also incorporates a more pronounced supply chain risk than before. If data center budgets slow down, the pressure does not stop at Wall Street: it flows back to the Asian suppliers fueling the AI infrastructure.
This is where the category becomes less comfortable. The MSCI EM remains categorized as "emerging," but Taiwan now accounts for 24.8% of the basket, ahead of China at 23%, while Korea represents 18.7%. Together, Taiwan and Korea account for 43.5%, nearly double China's weight. The debate is therefore no longer just about whether emerging markets are still undervalued. It is about whether the word "emerging" still accurately describes the index.
