Asia & emerging markets review – volatility taking centre stage

The event dominating headlines in 2026 has been conflict in the Middle East. Since war broke out at the end of February, an increase in oil prices has led to expectations of higher inflation. The knock-on impact has affected both bond and stock markets.

This article isn’t personal advice. If you’re not sure an investment is right for you, ask for financial advice. Investments can fall as well as rise in value, so you could get back less than you invest.

How have markets reacted?

Stock market reaction in emerging countries has been volatile.

Asia – which makes up the majority of the emerging markets sector – is a large importer of energy. With global oil supply disrupted by the effective closure of the vital Strait of Hormuz, there are concerns that countries could face energy shortages if the situation persists. Over half of the oil passing through the Strait ends up in either China or India. South Korea is also a popular destination.

Growth forecasts for developing countries in Asia have been cut for the next two years as a result. Inflation expectations have moved in the opposite direction. With the level of uncertainty high, central banks have opted to not make changes. Interest rates in China, India, and South Korea were all held at existing levels in recent meetings.

Stock markets in Latin America were calmer. The region is less reliant on Middle Eastern oil and contains many companies that could benefit from higher energy prices.

Despite underperformance and heightened volatility compared to developed markets in March, emerging markets have recovered well following the announcement of a ceasefire in early April. As always, past performance isn’t a guide to future returns.

AI progress continues

Away from tensions in the Middle East, Asian countries continue to show they have a role to play in artificial intelligence (AI) adoption. Following DeepSeek’s release of a low-cost AI model in January 2025 that shook global markets, the Chinese company released its latest model at the end of April.

Market reaction to the latest release was subdued compared to last year as there’s now an expectation that Chinese AI models will be cheaper to operate than US ones. Competition within China is also increasing, as companies like Alibaba bring products to market.

In Korea, Samsung Electronics became the second Asian company to reach a market capitalisation of $1 trillion. The company’s profits have surged as demand for its memory chips continues to increase.

How have Wealth Shortlist funds performed?

Performance has varied for the Asia and emerging markets funds on the Wealth Shortlist over the past 12 months. We expect this though, as fund managers have different investment styles which bring success at different times.

Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest and make sure any new investment forms part of a long-term diversified portfolio.

For those looking to invest in emerging markets, a global emerging markets fund or a fund offering wide exposure to Asia could be a good option. Although, investing in these areas typically comes with higher levels of risk than developed markets.

For more details on each fund, its charges, and specific risks, see the links to their factsheets and key investor information.