Article thecaseforasianequities ltr

The Case for Asian Equities INSIGHT | EMERGING MARKETS EQUITY TEAM | October 2026

For more than a decade, global equity portfolios have been AUTHORS

dominated by the United States. And rightly so. U.S. companies AMAY HATTANGADI, CFA delivered exceptional earnings growth, provided technology Portfolio Manager leadership and produced strong shareholder returns. But active Emerging Markets Equity Team investing is not about yesterday’s winners. It’s about identifying positive returns that are not yet reflected in today’s prices. STEVE SUN, CFA Managing Director We believe Asia is where those returns now sit. Emerging Markets Equity Team

First, Asia Continues To Offer Stronger Economic Growth Even with the pressure from higher energy costs and increased global uncertainty, we expect Asia, on the whole, to deliver stronger economic growth than developed markets. This matters because economic growth compounds: rising income fuels consumption, which deepens financialization and lifts corporate revenues.

Across India and Southeast Asia, hundreds of millions of consumers are climbing into higher-income categories, shifting their spending away from just basic goods. According to the World Bank, about one in three people in the region now belong to the middle classes.1 For investors, this growth helps create a long runway not dependent on a single economic cycle.

Second, Asia Is Central to the Global AI Ecosystem There is no AI story without Asia. In the U.S. the focus remains firmly on the Mag 7.2 But without certain Asian companies, whether Taiwan Semiconductor, Samsung or SK Hynix, those Mag 7 companies will be hard pressed to function effectively (Display 1). And it’s not just the semiconductor companies, but the server components, chip testing, assembly, server racks, cooling systems among others. So far, the biggest beneficiaries of the massive AI capex, roughly $2 trillion for 2026-2027,3 have been Asian companies across not just Korea and Taiwan, but countries like Thailand and Malaysia.

1 Beyond Poverty: Why Growing the Middle Class Is a Different Challenge, Lalita Moorty and Sailesh Tiwari, World Bank, 8/31/2026. 2 Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla 3 Morgan Stanley 2026 Midyear Outlooks

DISPLAY 1 The Engines Behind Global AI TSMC and SK Hynix gross margins (%) reflect their dominance

1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26 2Q26

Source: Bloomberg. As of 06/30/2026. TSMC and SK Hynix are the top players in their field. Hynix has a 50% share of high bandwidth memory (HBM) market by revenue and 62% of global HBM shipments. TSMC manufactures more than 90% of the world’s leading-edge logic chips.

Third, Valuations Remain Attractive there has been increased attention being paid by companies After more than a decade of outperformance, U.S. market to focus on shareholder returns, increased transparency and valuations have become elevated. And with the rise of improved corporate governance. Korea’s Corporate Value-Up the Mag 7 and AI, many global portfolios with a large U.S. program is the clearest example (Tales From the Emerging weighting are now highly concentrated in a small group of World, Nov. 2025). We think these changes matter as richly-valued U.S. tech companies. By contrast, China, Korea, growth alone does not guarantee shareholder returns. Southeast Asia and parts of India offer differentiated earnings Investors benefit when management teams allocate capital drivers and, in many cases, at more reasonable valuations. effectively and recognize the importance of return on equity, sustained dividends and opportunistic share buybacks. China might be considered a controversial investment, but is nonetheless a place where we believe selective We believe this diverse market offers both broad opportunities exist. A weak job market, property sector diversification and active selection of countries and stocks in stress and poor consumer sentiment are understood, a region that offers strong growth, leadership in technology, but pockets of growth in the technology, healthcare and with rising domestic consumption and improving governance…