Beyond the AI Theme

Beyond the AI Theme The Case for a Broad, Actively Managed Approach to EM Equities Hiren Dasani, CFA Wen Loong Lim, CFA White Oak Emerging Markets CIO White Oak Portfolio Manager

01 02 03 04 The opportunity is far bigger Earnings are compounding We believe the foundations A chance to buy structural than AI. Semiconductors and fast. EM earnings are are stronger than in past growth at a discount. AI beneficiaries matter, but on a 35%+ compound cycles. Lower inflation, EM equities trade at a the real story is structural annual growth rate (CAGR) healthier fiscal positions ~44% forward-price-to- growth across financials, for calendar year (CY) and more resilient external earnings (P/E) discount to consumer, healthcare, 2025-CY2027e, versus ~21% balances position many developed markets – industrials, manufacturing, for the U.S., multiple engines, EMs better equipped to near 25-year lows.2 and infrastructure – spread not a single theme. 1 absorb shocks. across countries that don’t rise and fall together.

1 Source: FactSet, WhiteOak 2 Source: IMF, UBS, WhiteOak April 2026 August 2026

Emerging Markets | Beyond the AI Theme – The Case for a Broad, Actively Managed Approach to EM Equities August 2026

Why Emerging Markets Equities, Since these drivers are largely independent, a correction in one theme or country need not Why Now? derail the others. Emerging markets have quietly done something 02 | Multiple engines of earnings growth. This breadth impressive: they’ve compounded through a year of shows up in the numbers. EM earnings are tracking a genuine stress. Over the past twelve months, EM equities 35%+ CAGR for CY2025-CY2027e, against ~21% for absorbed rising U.S. trade tensions, an oil-price spike, and the U.S., with rising consumption, financial inclusion, supply-chain disruption after the Middle East conflict – healthcare, infrastructure, and manufacturing all and still delivered strong returns, underpinned by steady contributing.3 That diversity stands in sharp contrast corporate earnings and improving macro fundamentals. to the U.S., where returns have concentrated in a The global backdrop remains fragile, but the through-line narrow band of large-cap tech and AI names – is resilience, not fragility. leaving developed-market investors increasingly The AI cycle has been a big contributor to returns over dependent on a single leadership cohort. EM GDP the last year, with Taiwan and South Korea anchoring is also simply faster: 4.5% expected in 2027 versus the semiconductor value chain and China increasingly 2.1% for the U.S. participating through hardware, power equipment, and 03 | Better foundations than in prior cycles. This is not infrastructure. But leaning on any single theme is the fragile EM of past crises. Compared with exactly the mistake this asset class rewards you for previous global shocks, many EM economies now avoiding. Four structural forces make the case: benefit from stronger policy frameworks, lower 01 | Breadth: one asset class, many independent growth inflation, healthier fiscal positions and more engines. Technology drove the majority of index resilient external balances – a firmer base from returns over the last year, accounting for roughly 70% which to navigate external volatility. of total EM returns, yet compelling opportunities sit 04 | Growth still at a discount. Despite strong recent across consumer, financials, healthcare, and performance, the MSCI EM Index trades at roughly industrials – powered by China’s dominance in a 45% forward-P/E discount to the MSCI World Index advanced manufacturing, rising domestic – near the wide end of its multi-decade range. consumption across the developing world, India’s Investors are being paid to access faster growth financialization, digitization and formalization, and at a lower price. global investment in defense and data-center power.

Figure 1. MSCI EM vs. Developed World Consensus 12-month Forward Price to Earnings 5%

-15% (% Premium / Discount vs. MSCI World) -25%

-45% -45% as of July 2026 -55%

Source: BofA Global Research, MSCI, White Oak