Investment letters
GEM EQUITIES: DOUBLING DOWN ON QUALITY GROWTH IN EMERGING MARKETS
22-sep-2026
Nick Payne
Analyst / Portfolio Manager
Key Takeaways
- Reset and refocused: Comgest’s GEM Equity Strategy is more disciplined, higher conviction and aligned with our core quality growth philosophy
- Good value, overlooked: Emerging markets companies trade at a ~40% discount to developed market peers, yet many global investors hold far less than they have historically
- More than just AI: Broader long-term growth trends from across the emerging markets region include more people gaining access to banking and financial services for the first time, rising consumer spending and industrial expansion
LOOKING BEYOND A NARROW EMERGING MARKETS RALLY
At first glance, the emerging markets rally of the past two years looks like a broad revival. The shift began in 2024, supported by falling interest rates, a steadier macroeconomic outlook and the AI boom, which has helped reignite investor interest. The numbers, however, show that the recovery has not been shared equally. Three semiconductor chipmakers (TSMC, SK Hynix and Samsung) at the heart of the AI supply chain now account for close to 30% of the MSCI Emerging Markets Index.1
With US technology companies expected to spend around $760 billion in AI capital expenditure this year,2 that spending is showing up in the record earnings of these north Asian semiconductor giants.3 Tight supply and surging AI-related demand have pushed memory and chip prices to record highs, raising the memory makers’ profitability ahead of companies such as Nvidia, Apple and Alphabet.4
While it would be easy to conclude that owning emerging markets today simply means owning this trio, this is actually a quirk of how the index is built, not a picture of the wider opportunity. ASEAN markets accounted for under 4% of the MSCI Emerging Markets index in December 2025, dwarfed by China and India.5 China, long cast as the AI boom’s second-biggest beneficiary, was slower to be rewarded with Alibaba and Tencent lagging their Seoul and Taipei peers for much of the rally.6 For many companies in emerging markets, the story has been one of trade tensions and political uncertainty, not an AI windfall.
Rather than crowd into the same handful of names or themes as the index, we hunt for well-run companies that we believe meet our quality growth criteria: durable competitive advantages, strong free cash flow and visible, long-term growth. Finding them is where three decades in emerging markets earns its keep. Through our own in-depth research and on-the-ground engagement, we aim to know a business as thoroughly as we can and to act decisively when it counts. We believe this insight gives us an edge: the conviction to hold these companies for the long term, in a concentrated portfolio built to compound through market swings.
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