Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials HomeInvestorSoaring profits in emerging markets build case for a raging bull rallyStocks riding gains of nearly 30 per cent this year is evidence of healthy profit growthAuthor of the article:Last updated 2 hours ago You can save this article by registering for free here. Or sign-in if you have an account.South Korea's benchmark Kospi index topped 9,000 points for the first time on June 18, 2026, on the back of a tech-fuelled rally led by chip titans Samsung and SK hynix. Photo by Jung Yeon-je /AFP via Getty ImagesFor the first time in four years, companies in emerging markets are beating profit estimates, giving investors a fresh reason to believe the bull market is just getting started.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorCompanies in the MSCI EM Index have reported average annual earnings above expectations set a year ago for the first time since April 2022, according to data compiled by Bloomberg. Asian tech firms are driving the results, but profits are also improving in other sectors of the market, like Indian oil refiners and Brazilian electricity companies.With emerging-market stocks riding gains of nearly 30 per cent this year, evidence of healthy profit growth is signalling to bulls that the rally is being built on solid fundamentals, rather than speculative froth. That’s prompting investors like Morgan Stanley and JPMorgan Chase & Co. to predict that gains will spread beyond artificial intelligence-related stocks.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try again“This is a genuine inflection point,” said Ninety One UK Ltd.’s Archie Hart. “The market is finally being validated by fundamentals rather than running ahead of them.”The weighted average earnings-per-share reported by MSCI companies in the 12 months through May was 95.1 index points, rising above analysts’ blended-forward estimates of 94.6 made a year ago.Stronger earnings may persuade more asset managers to shift money to EM stocks, helping drive the next stage of the rally. A five per cent shift from U.S. portfolio weightings would translate into roughly a 30 per cent increase in EM allocations due to the relative sizes of the markets, according to Hart’s calculations.He also highlighted that emerging-market technology companies still trade at a steep discount to their U.S. peers while generating faster earnings growth as another reason to be bullish. An index of U.S. semiconductor equipment makers trades at more than 46 times estimated 12-month forward earnings, compared with 12.3 times for the MSCI EM Information Technology Index.The earnings surprises are part of a comeback in emerging markets that took hold in 2025. Profits started to improve last year on the back of more AI spending and China’s economic stimulus. Before that, EM profits fell by 25 per cent between 2022 and 2024 as higher interest rates sapped growth.Among AI-related juggernauts, South Korea’s SK hynix Inc. reported first-quarter profit 43 per cent above estimates, Samsung Electronics Co. Ltd. exceeded projections by 16 per cent, and Taiwan Semiconductor Manufacturing Co. beat forecasts by 5.7 per cent. Among other top performers, Indian Oil Corp. exceeded estimates by 33 per cent, while Brazilian electricity producer Eneva SA posted a 44 per cent beat.“Performance across different regions will likely continue to vary, but the direction of travel across virtually all of them is now positive, which has not been true for most of the past decade,” said Morgan Stanley Investment Management’s deputy chief investment officer Jitania Kandhari.Still, the dominance of the AI trade is raising concerns about concentration risk, she said. Asian companies are beating expectations by a wide margin, compared with the rest of the EM universe, where the surprises are more modest or negative.Energy companies started beating earnings estimates this quarter, and financial companies crossed the threshold at the end of 2025. Commodity and industrial firms are reporting profits close to expectations. But missed estimates remain the rule in other parts of the market. Consumer staples and consumer discretionary companies are among the biggest laggards, while health care, real estate and utilities are also underperforming forecasts.Despite the mixed profit performances of the subgroups, the MSCI EM index has surged above 1,800, reaching successive records.“There is still narrowness under the hood,” said Ashish Chugh, a money manager at Loomis Sayles. “Much of the EPS growth will come from the tech sector.”There are other factors to support the case for a wider earnings recovery. As China emerges from deflation, investors see scope for a broader industrial recovery. Equity issuance is also slowing and buybacks are increasing, boosting earnings per share.Since 2010, the country’s stock market had been flooded with new share issuance, suppressing EPS growth by as much as six percentage points even when underlying businesses performed well, according to Hart, who says that trend is now reversing.JPMorgan Asset Management predicts a revival across emerging markets that will underpin earnings growth. The environment should favour industrial, defence and commodity sectors as China’s economy recovers and inflation accelerates, according to Anuj Arora, chief investment officer for emerging-market equities at JPMAM.“A softer dollar, ongoing deficit spending in major economies, and a multiyear AI and infrastructure capex cycle continue to create a constructive backdrop for emerging markets,” Arora said. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.