UBS has updated its December 2026 MSCI Emerging Markets target to 1,680 and reiterated an overall attractive stance on emerging market equities. The bank attributes the revised target to leadership in artificial intelligence innovation, better corporate governance trends in parts of Asia, and an uplift from higher commodity prices.
Earnings and target implications
UBS is forecasting 33% earnings growth for EM equities in 2026. The revised MSCI EM target implies upside in the high-single-digit to low-teens range versus current levels. The bank also expects the effect of recent energy market disruption on corporate earnings to be limited - projecting an impact below mid-single digits, on the assumption that supply constraints remain temporary.
Regional and sector views
Mainland China tech remains UBS's most attractive preference within emerging markets. The bank highlights the potential for advances in large language models and the roll-out of new AI products. UBS interprets recent weakness in the sector as driven by sentiment and short-term margin pressures rather than a deterioration in long-term earnings potential.
South Korea retains an attractive rating from UBS, supported by robust memory demand and rising DRAM prices. The bank expects South Korea to contribute nearly two-thirds of EM's earnings-per-share growth in 2026, reflecting a significant jump in memory chip profits.
UBS moved Indian equities to neutral from attractive earlier this month. That downgrade reflects an increased sensitivity of Indian equities to higher fuel prices. Correspondingly, the bank has lowered its GDP and EPS growth forecasts for India for the current fiscal year.
Brazil is singled out for its relatively solid fundamentals, an active domestic rate-cutting cycle, and its position as a major commodity exporter. UBS notes that Brazil's market composition - with exposure to real assets, financials, and cyclical sectors - offers diversification benefits in a higher energy price environment.
Overall positioning
UBS continues to favor diversified exposure across emerging markets, concentrating on economies and sectors that stand to benefit from AI adoption, domestic policy support, firmer commodity prices, and structural governance improvements. The bank explicitly lists mainland China, mainland China's technology sector, South Korea, Brazil, Indonesia, and Malaysia as focus areas.
Summary takeaways
- UBS sets its December 2026 MSCI EM target at 1,680, underpinned by AI leadership, better governance in parts of Asia, and higher commodity prices.
- The bank projects 33% EM earnings growth in 2026 and anticipates only a limited - below mid-single-digit - earnings hit from energy disruptions if supply constraints are temporary.
- Regional convictions include attractive views on mainland China tech and South Korea, a neutral stance on India, and constructive commentary on Brazil.