Emerging Markets: FAQs and Pushback on Our EM H2 Outlook

This report addresses investor concerns regarding the H2 Emerging Markets outlook, maintaining a constructive stance on EM equities and select local debt markets. It highlights Korea/Taiwan semiconductors, Brazil, and South Africa as primary investment focuses while dismissing fears that potential Fed tightening will structurally derail EM performance.

Key Takeaways

• 1.UBS remains constructive on Korea and Taiwan semiconductors, despite recent equity drawdowns, due to strong fundamentals like memory demand-supply mismatches.
• 2.Potential US Federal Reserve rate hikes are unlikely to disrupt the EM outlook for long due to factors like moderated inflation expectations and resilient macro conditions.
• 3.Brazil and South Africa are highlighted as key alpha generators for H2, driven by specific election catalysts and fiscal/valuation dynamics.

Table of Contents

• Amid Korea's 20% drawdown - is the best behind us for EM equities?
• Where are the brightest prospects for diversification outside Korea and Taiwan?
• Could Fed tightening derail FX carry trades and resilient credit markets?
• Peak Fed hawkishness? Is it time to load up on EM debt?
• What are the implications of China's rising energy independence for the rest of EM?

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