MSCI EM rose 7% w/w after the ceasefire, and Goldman Sachs sees further upside in EM

Overview

This report is Goldman Sachs' weekly emerging markets portfolio strategy note published on April 10, 2026, themed 'tensions on pause.' It focuses on the changes in EM equities, regional performance, fund flows, valuations and macro data after the U.S.–Iran ceasefire. The core conclusion is that the ceasefire reduced energy price pressure and drove a rapid rebound in MSCI EM; however, the index has recaptured only about half of the losses from the lows, and if the conflict continues to de-escalate, valuation and positioning resets may support further returns.

Core views

Goldman believes EM equities have already reset in valuation and positioning after the conflict shock, and if geopolitical conditions stabilize further, the potential index return remains attractive. Regionally, North Asia and LatAm led the rebound, with North Asia's tech-heavy markets standing out; Saudi Arabia lagged relatively due to lower oil prices. On positioning, Goldman remains overweight Korea, China, Brazil and South Africa, sees Brazil benefiting from stronger energy sector performance and room for domestic cyclicals to recover, prefers North Asia over South Asia, and believes South African equities' risk/reward has improved after a sharp repricing.

Analysis framework

The report combines index performance, regional and country relative returns, fund flows, valuation percentiles, earnings revisions, macro data and rate sensitivity to assess the recovery room for EM risk assets. Its framework is not single-company fundamental research, but top-down portfolio strategy research, focusing on the impact of the ceasefire event, energy prices, foreign capital flows and valuation re-rating on EM equities.

Methodology notes

• 组合策略区域与风格配置

  Adjust EM allocation based on regional performance, valuations, earnings revisions and macro sensitivity.

  The report compares regions such as North Asia, LatAm, EM Europe, ASEAN, South Asia and CEEMEA, and further distinguishes overweight or underweight preferences for technology hardware, internet, commodities, downstream and consumer-sensitive sectors.

• 估值分析NTM P/E与Z-score

  Use forward 12-month P/E and standard deviations from historical averages to judge whether valuations are cheap.

  MXEF currently trades at 11.6x NTM P/E, 0.7 standard deviations below the 10-year average, supporting the report's view that valuations have reset.

• 资金流分析FII/GEM资金流

  Track foreign buying/selling and global EM fund flows to gauge positioning pressure and marginal demand.

  The report notes that after US$79bn of selling since the conflict began, there have been US$9bn of inflows, and EM equities saw US$7.5bn of buying in the latest week, indicating a temporary easing of foreign selling pressure.

Asset mapping & comparison

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

• MSCI EM / MXEF

  Core coverage asset

  Strengths

  Valuations are below long-term average, have rebounded after the ceasefire but have not fully recovered the decline, and foreign selling pressure has eased.

  Weaknesses

  Still sensitive to geopolitics, energy prices and global risk appetite.

  Comparison

  Post-ceasefire gains were broadly in line with DM equities, but the report says there is still room for further recovery.

  Risks

  Re-escalation of conflict, another rise in energy prices, renewed foreign outflows.

• North Asia

  Regional preference

  Strengths

  Tech-heavy, led the post-ceasefire rebound, and the report sees North Asia as preferable to South Asia.

  Weaknesses

  Korea and Taiwan experienced relatively heavy foreign outflows during the conflict.

  Comparison

  More favored than South Asia by the report.

  Risks

  Tech valuation volatility, reversal in foreign flows, changes in the global semiconductor cycle.

• Brazil equities

  Relatively favored market

  Strengths

  Energy sector performance has been solid, lagging domestic sectors have room to recover, and the market is sensitive to local rate cuts.

  Weaknesses

  Saw a modest outflow in the latest week.

  Comparison

  During the conflict, foreign flows were better than Korea and Taiwan.

  Risks

  Local rate path, inflation surprises, commodity price swings.

• Saudi Arabia equities

  Relatively lagging market

  Strengths

  Was supported by oil prices during the conflict.

  Weaknesses

  Underperformed relatively after oil prices fell following the ceasefire.

  Comparison

  Lagged the rebound seen in North Asia, India and LatAm.

  Risks

  Oil price volatility, geopolitical uncertainty, and an overly high energy weight.

Key data

• MSCI EM weekly performance+7% w/wEnergy prices fell after the U.S.–Iran ceasefire, sparking a rebound in EM equities.
• North Asia performance+10%Tech-heavy markets led the main regions.
• India performance+7%Ranked near the top among major markets.
• Saudi Arabia performance+1%Underperformed relatively amid falling oil prices.
• MSCI EM gain after ceasefire announcementabout +5%Broadly in line with developed-market equities.
• Foreign outflows since the conflict beganUS$79bnThe report says there has been significant foreign selling since the conflict began.
• Recent foreign inflowsUS$9bnScale of inflows after foreign selling paused.
• EM equity fund flows last week+US$7.5bnTaiwan contributed +US$6.1bn, Korea contributed +US$3.5bn, and Brazil was -US$0.2bn.
• MXEF valuation11.6x NTM P/E0.7 standard deviations below the 10-year average.
• EM 2026E EPS revision+5.3%Up over the past month, mainly driven by Korea and Brazil.

Impact & implications

If the ceasefire and de-escalation trend continues, EM equities may benefit from lower risk premiums, renewed foreign inflows, valuation re-rating and upward earnings revisions. The investment implication is a preference for markets where valuations and positioning have already reset and earnings or macro beta is stronger, especially Korea, China, Brazil and South Africa, as well as technology hardware, internet and commodity-related sectors; while remaining cautious on downstream and consumer-sensitive sectors.

Risks

• The U.S.–Iran conflict or regional tensions could re-escalate.
• A renewed rise in energy prices could weigh on risk appetite and alter relative regional performance.
• Foreign inflows may reverse, especially in markets such as Korea and Taiwan that experienced heavy outflows.
• Unexpectedly higher inflation could limit central banks' room to ease.
• Valuation re-rating depends on stable conditions and realized earnings upgrades.

What to watch

• Whether the ceasefire holds and Middle East tensions continue to ease.
• Whether MSCI EM continues to recover from the lows and recapture the remaining losses.
• Whether foreign inflows into Taiwan, Korea and Brazil continue.
• Whether 2026E EPS upgrades led by Korea and Brazil broaden to more EM markets.
• How oil price moves affect Saudi Arabia, Brazil and commodity sectors relative to others.
• The policy paths of the central banks in Korea, India, Poland and Peru, and inflation data for the Philippines, Colombia, Egypt, Chile, Turkiye, Czechia, Hungary, Taiwan and Mexico.