UBS has increased its forecast for the MSCI Emerging Markets (EM) index, setting a new target of 1,640 by December 2026, up from its prior projection, according to a recent research note. The upgrade rests on robust earnings momentum and what the bank describes as the strongest expected earnings growth across global equity regions.
The investment bank sustained its overall view of emerging market equities at "Attractive." In its research note, UBS underscored earnings growth as the principal catalyst for the upgrade, projecting 20% earnings-per-share growth for the MSCI EM index this year.
UBS attributed that earnings outlook to three primary factors: Chinas economic recovery, rapid uptake of artificial intelligence, and resilient domestic demand in several key markets. The note emphasizes these elements as central to supporting corporate profit expansion across emerging markets.
Beyond earnings, UBS pointed to a constructive macro environment that should help underpin capital flows into the asset class. The bank highlighted softer U.S. dollar trends, easing global financial conditions, and supportive monetary policy as forces likely to sustain investor interest in emerging markets.
Analysts at UBS also drew attention to improving governance standards, particularly in Asia, noting that better governance is contributing to higher return on equity and bolstering valuations across the region.
Within the emerging markets complex, UBS identified China technology stocks as its "Most Attractive" subcategory. The bank cited three supporting observations for that stance: government backing for AI development, improving liquidity in the market, and signs of macroeconomic stabilization in China.
Outside of China, UBS named India, Brazil, and Indonesia as preferred markets, pointing to compelling domestic growth drivers and favorable earnings trajectories in those economies.
UBS noted that emerging market equities delivered a strong performance in 2025, rising 34% - the best annual return since 2017 - yet the bank maintained that valuations remain attractive relative to developed markets. The research note also observed that global investors remain underallocated to emerging market equities.
UBS explicitly stated that continued underallocation by global investors could leave scope for further inflows into EM stocks. The bank warned, however, that earnings delivery and policy support will be critical to sustaining the rally into 2026.
Context and implications
- UBSs revised index target is 1,640 for MSCI Emerging Markets by December 2026.
- The bank retains an "Attractive" rating on emerging market equities and forecasts 20% EPS growth for MSCI EM this year.
- China technology stocks are rated "Most Attractive" because of policy support for AI, improving liquidity, and signs of macro stabilization.