JPM Emerging Markets EQ

J P M O R G A N Global Markets Strategy 30 July 2026

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Emerging Markets Equity Strategy EM Drawdown - A Normal Part of the Cycle

MSCI EM has sold off ~15% from its June 22 peak (the same date as the KOSPI’s Emerging Markets Equity Strategy peak), driven largely by weakness in AI/semiconductor-heavy markets in South Rajiv Batra AC Korea and Taiwan. Over the same period, MSCI South Korea (US$) is down 37% ( and MSCI Taiwan (US$) is down 18%. Corrections of >10% are not unusual in MSCI EM bull runs (Table 2). The average historical correction is ~21%, which w E jirsaceo d n 2 0 M J.P. Morgan Securities Singapore Private Limited

implies ~6% further downside to reach the mean drawdown in this cycle. That Emy Shayo Cherman AC said, the tech-led sell-off is starting to look capitulatory: aggressive retail ( deleveraging, extremely depressed sentiment, and heavy selling in large-cap tech Banco J.P. Morgan S.A. and growth. In Korea, we believe the leveraged ETF unwind is complete and Anindita Gandhi AC hedge funds are ~90% through deleveraging (back to acceptable levels). If a ( durable bottom forms here, history is supportive: the median 12-month return after prior EM corrections has been ~28%. Valuations also look more constructive, with J.P. Morgan India Private Limited EM trading at ~1 standard deviation below its historical mean on 12-month CEEMEA Equity Strategy forward P/E—a level that has typically marked rebound points since 2015. David Aserkoff, CFA Fundamentals remain relatively favorable. EM earnings growth forecasts are ( higher than US/DM, and EM revisions have been more positive than those across the broader DM complex. We remain overweight EM equities in our global J.P. Morgan Securities plc

allocations and maintain our 12-month base-case MXEF target of 2000. At the Asia Equity & Quantitative Strategy stock level, we note that the companies shown in Table 4 are exposed to the m E u d v n k t:lrsceo M

Mixo Das oversold Momentum theme. Further, we recommend a bucket of laggards (Table ( ) likely to benefit from continued market broadening/rotation, and Quality- m M t:lirfsceaokngdybE J.P. Morgan Securities (Asia Pacific) Limited/ J.P. Growth stocks (Table 6), which should outperform unless recession risk rises lit-rsacu y o h k E Q G w M

Morgan Broking (Hong Kong) Limited materially.

• The correction in EM equities since the peak on 22 June 2026 has delivered an aggregate decline of ~15% (at the time of writing). This risk-off shift has hit the biggest and most crowded parts of EM, especially in Asia tech where a sharp reversal in AI/semiconductor stocks in South Korea and Taiwan has followed outsized rallies earlier in the year. In Korea, leveraged ETF positioning and related flow dynamics appear to have amplified the drawdown and day-to-day volatility, and in recent days increasingly has the hallmarks of hedge fund positioning unwind. A re-escalation of the Middle East conflict, which is again pressuring energy prices, has also seen renewed sell-offs in most energy-dependent markets. Consequentially, the markets that have sold off the most (MSCI US$ indexes) are South Korea (-37%) and Taiwan (-18%) and the KOSPI index is now -40%. In sectors, some of the highest sell-offs have been in Korea IT (-42%), Korea Industrials (-37%), Korea Discretionary (-26%), Taiwan IT (-19%), and Thailand IT (-16%) - all of which have recorded notably strong performances in a 12-month timeframe. On the other hand, markets that have been the most resilient through this period are Czech (+7%), Philippines (+7%), Colombia (+4%), Brazil (+4%), and China (+4%) - Table 1. m w B T 6 0 2 u h d n p tirf()sJaeco

• Notwithstanding this ongoing drawdown wave, we highlight that >10% corrections are not uncommon in bull runs of MSCI EM - Table 2. A 30% M w E 0 2 n d jirsaceo

drawdown of 2002 coincided with the US military build-up against Iraq. If we look back at…