EM Equities Hit All-Time High; Korea & Taiwan Lead Gains Amid Lingering Geopolitical Risks

Overview

JPMorgan’s April 2026 Emerging Markets Equity Strategy summary observes that, despite heightened Middle East geopolitical tensions and the ongoing blockade of the Hormuz Strait, EM equities reached an all-time high in April. This strength was primarily driven by robust rebounds in Korean and Taiwanese markets—especially in the technology and industrials sectors. However, notable internal divergence persisted: fund flows showed strong ETF inflows offsetting continued non-ETF outflows; select markets—including India and Indonesia—underperformed; and volatile commodity prices intensified macro uncertainty.

Core views

Market Performance and Regional Divergence: EM equities performed strongly in April, with the MSCI EM Index rising. Korea reclaimed top spot: the KOSPI gained 30.6% and the MSCI Korea Index rose 37.4%, both reaching all-time highs; year-to-date gains stood at 62%, the best in the region. Taiwan also delivered outstanding results: the MSCI Taiwan Index rose 26.6%, setting a new all-time high, supported by robust Q1 tech earnings, stable cloud service provider capex commitments, and GDP growth near a 39-year high (+13.7% y/y). In contrast, ASEAN equities rebounded weakly—Thailand (+3.8%) and Malaysia (+2.3%) led gains, while the Philippines (-1%) and Indonesia (-5%) declined further. Indian equities rose 9.1% but underperformed regional benchmarks, weighed down by second-order energy shortage impacts post-conflict and AI-related headwinds in the IT sector. Fund Flows and Earnings Expectations: EM equity funds resumed net inflows in April, totaling $3.9 billion (provisional, as of April 29), reversing March’s sharp outflow (-$10.7 billion). Notably, inflows were fully driven by ETFs (+$8.2 billion), while non-ETF funds posted continued net outflows (-$4.3 billion), albeit at a slower pace than in March. Regionally, Global EMs (GEMs) attracted $7.3 billion, Latin America $3.3 billion, while Asia ex-Japan saw $6.7 billion in large redemptions. On earnings, analysts significantly upgraded consensus EPS forecasts for the MSCI EM Index for 2026/2027, largely attributable to substantial upward revisions for Korea (2026/2027 EPS raised by 28.3%/31.1%). Latin America contributed positively as well, with healthy upgrades for Brazil, Chile, Peru, and Saudi Arabia, while Qatar, Turkey, Indonesia, and the UAE saw downward revisions. Commodities and Currency Dynamics: Commodity markets exhibited pronounced volatility. Brent crude touched $144/barrel mid-month—surpassing its pre-2008 financial crisis peak—but closed the month at $122/barrel, down 3.5% monthly yet up 87.9% year-to-date. Precious metals continued declining—gold (-1.1%) and silver (-1.8%)—though declines notably narrowed versus March. Base metals emerged as focal points: nickel surged 14% due to smelter shutdowns and soaring sulfur prices driving steep cost increases; copper rose 5.6%, supported by recovering Chinese apparent demand and sharp inventory drawdowns. The report notes that prolonged Middle East supply disruptions will create a record 1.9 million-ton global primary aluminum supply deficit in 2026—the largest since 2000. Currencies: the EMFX index rose 2.4% monthly, while the DXY fell 1.9%. The Hungarian forint (+7.0%), Brazilian real (+4.6%), and Chilean peso (+2.9%) performed strongest, whereas the Indonesian rupiah (-1.8%), Turkish lira (-1.6%), and Philippine peso (-1.2%) were weakest. Style and Sector Rotation: By style, the Momentum factor re-emerged as the leader in April, while Low Volatility lagged. Sector-wise, prior laggards rebounded strongly: Information Technology (IT, +32.2%), Industrials (+20.4%), and Real Estate (+7.7%) posted the strongest gains. Defensive sectors—including Communication Services (+0.4%), Consumer Staples (+3.7%), and Health Care (+4.0%)—were sold off. In Korea, the IT sector led across revenue growth, earnings growth, and margin expansion, prompting analysts to continue upgrading EPS forecasts for Korean IT and Industrials.

Analysis framework

The institution employed a combined top-down and bottom-up analytical framework. First, it tracked price performance of the MSCI EM Index and its sub-regional indices to identify Korea and Taiwan as primary sources of excess returns. Second, it analyzed fund flow data—differentiating ETF and non-ETF flows—to gauge structural shifts in investor sentiment (passive vs. active). Third, it integrated macro events (e.g., Hormuz Strait blockade, U.S.-Iran ceasefire agreement) and micro-level corporate earnings (e.g., Q1 results from Korean and Taiwanese tech firms, GDP data) to explain market drivers. Finally, it validated earnings growth’s supportive role through tracking analyst revisions to EPS consensus forecasts, supplemented by commodity price and FX movements to assess changes in macro risk premia.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Price dynamics analysis of base metals (nickel, aluminum, copper)

  The report analyzes supply-side shocks (e.g., smelter closures, Middle East supply disruptions, OPEC+ policy shifts) and demand-side developments (e.g., Chinese consumption recovery) to explain price trends and forecast future supply-demand gaps for commodities such as nickel, aluminum, and copper.

• Company Fundamentals & Financial FrameworkEarnings Quality Analysis

  EPS consensus forecast revisions and earnings beat/miss analysis

  By tracking the magnitude of analyst upgrades/downgrades to 2026/2027 EPS consensus forecasts—and the beat rate among recently reported companies—the report evaluates the sustainability and quality of earnings growth, especially for Korea and Taiwan.

• Quantitative/Factor/Portfolio TheoryStyle factor analysis

  Relative performance comparison of Momentum vs. Low Volatility factors

  The report examines relative performance across investment style factors (e.g., Momentum, Low Volatility) to indicate whether current market preferences favor trend-chasing or defensive positioning.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Korean Equity Market (KOSPI/MSCI Korea)

  Beneficiary: Strong tech earnings, significant EPS upgrades, foreign capital inflows

  Strengths

  IT and Industrials lead gains; EPS forecasts substantially upgraded; valuation relatively reasonable (Fwd P/E 7.2x)

  Weaknesses

  Declining consumer confidence index; lingering geopolitical uncertainty

  Comparison

  Outperformed all other EMs; top YTD performer

  Risks

  Escalation in Middle East tensions disrupting supply chains; retail investor profit-taking

• Taiwanese Equity Market (MSCI Taiwan)

  Beneficiary: Robust global tech demand, rapid GDP growth, stable CSP capex

  Strengths

  Q1 GDP growth near 39-year high; strong tech earnings; large foreign inflows

  Weaknesses

  Elevated valuation (Fwd P/E 20.4x); modest foreign outflows late-month

  Comparison

  Second only to Korea; significantly outperformed other Asian markets

  Risks

  Peak in global tech cycle; geopolitical risks

• Indian Equity Market (MSCI India)

  Adversely Impacted/Underperformer: Energy shortage concerns, AI risks in IT sector, sustained foreign outflows

  Strengths

  Domestic institutional investor (DII) inflows provide support

  Weaknesses

  Expensive valuation (Fwd P/E 20.8x); structural challenges in IT sector; heavy energy import dependence

  Comparison

  Underperformed MSCI Asia ex-Japan and MSCI EM indices

  Risks

  Further energy price hikes; economic slowdown

• Indonesian Equity Market (MSCI Indonesia)

  Adversely Impacted: Currency depreciation, earnings forecast downgrades, foreign outflows

  Strengths

  High dividend yield (7%)

  Weaknesses

  Among worst-performing currencies; EPS forecasts downgraded; low market sentiment (RSI 18)

  Comparison

  One of the worst-performing major EMs in April (-8.3%)

  Risks

  Deteriorating global risk appetite; commodity price volatility

Key data

• MSCI Korea Index Monthly Gain (April)+37.4%All-time high; YTD gain +62%
• MSCI Taiwan Index Monthly Gain (April)+26.6%All-time high; Q1 GDP +13.7% y/y
• EM Equity Funds Net Flow (April)+$3.9 billionETF inflow +$8.2 billion; non-ETF outflow -$4.3 billion
• Korea 2026 EPS Forecast Upgrade+28.3%Consensus revision over past month
• Brent Crude YTD Gain+87.9%Down 3.5% in April; peaked at $144/barrel mid-month
• Nickel Price Monthly Gain (April)+14%Driven by cost surges and tightening supply
• 2026 Global Primary Aluminum Supply Deficit Forecast1.9 million tonsLargest since 2000

Impact & implications

The report concludes that although geopolitical risks (e.g., Hormuz Strait blockade) remain elevated, EM equities—particularly Northeast Asian tech hubs (Korea, Taiwan)—have absorbed some uncertainty via robust earnings growth and optimistic sector outlooks. The divergence in fund flows (ETF inflows vs. non-ETF outflows) suggests passive investors are allocating into EMs, while active managers remain cautious or rebalancing positions. Sharp commodity price swings—especially base metal supply bottlenecks—may generate complex inflationary and growth implications for resource-dependent economies (e.g., Latin America, parts of Asia). For investors, focus should shift from pure geopolitical hedging toward markets and sectors with strong earnings visibility and exposure to the global tech cycle (e.g., AI, semiconductors), while remaining alert to second-order negative effects of energy price volatility on energy-importing nations like India.

Risks

• Further escalation in Middle East geopolitical tensions leading to prolonged Hormuz Strait blockade and more severe oil supply shocks.
• Slowing global economic growth—particularly weakening demand in major developed markets—harming EM exports.
• Uncertainty around monetary policy paths of the Fed and other major central banks, triggering sharp USD volatility.
• Volatile commodity prices—especially energy and base metals—fueling imported inflation.
• Country-specific political risks, such as electoral deadlock in Brazil or adjustments to India’s energy policy.

What to watch

• Latest developments in the Middle East and navigability status of the Hormuz Strait.
• Upcoming quarterly earnings and capex guidance from Korean and Taiwanese tech giants.
• Policy responses from EM central banks to inflation and FX volatility.
• Inventory trends for base metals (nickel, aluminum, copper) and sustainability of Chinese demand recovery.
• Persistence of the ETF–non-ETF fund flow divergence and positioning behavior of active managers.