US equities outperform most emerging markets

This can be attributed primarily to the many technology giants that have emerged and expanded in the US during this period and to the artificial intelligence theme, which has become a massive factor on the stock markets and especially in the US economy. As a result, investment capital has flowed into the US on a large scale. The US dollar has been strong over the past years (albeit it retreated a bit in 2025) which has traditionally not been conducive to equities and bonds from emerging markets.

At the same time, Chinese equities are digesting the massive growth of previous decades, the decline in GDP growth rates due to China’s size and the aftermath of a huge real estate bubble.

Simultaneously, however, India is awaking from its slumber and became the new star among emerging markets in terms of economic growth and stock performance over the last 10 years.

Comeback of the emerging markets?

However, many emerging economies are undergoing similar developments as the advanced economies.

Individual sectors, such as technology and finance, and to some extent also consumer goods, are showing strong growth in sales, profits and, in some cases, share prices. And in a rising number of industries and product lines, companies from emerging markets are advancing to leading positions on the global markets.

That is another factor suggesting that emerging market equities as a whole could once again outperform developed equity markets in the coming years. And there are further arguments in favour of this.

For one thing, most emerging market stock markets are valued significantly cheaper. For another, emerging markets have often outperformed in the past when they grew significantly faster than industrialised nations and when this was accompanied by interest rate cuts in the US and a weaker dollar. This environment is also emerging at present. The current political shift in the US could also contribute to this, as international investors increasingly seek investment alternatives outside the US and the dollar.

This is, of course, no guarantee that emerging markets will outperform in the coming years, but it is certainly a good basis for doing so. Whether this upside potential will actually be (fully) realised in the coming years cannot, of course, be guaranteed, and only time will tell. Once again, it must be emphasised that this enhanced potential for returns is accompanied by higher risks. Emerging market equity funds continue to exhibit increased volatility, and capital losses cannot be ruled out.

Stock selection is a key factor

As important as fundamental economic and global considerations might be for the major trends on equity markets of emerging economies, selecting the right companies, sectors, and countries is at least as important.

This is a key factor for success, now more than ever. It is particularly relevant in view of rapid technological change and the associated opportunities and challenges for companies, as well as (geo)political changes and trends (e.g. trade conflicts, restructuring of supply chains and international economic cooperation).

This is precisely where the long-standing expertise of our experienced fund managers comes into play. Emerging market investments (both equities and bonds) have long been a core competence of Raiffeisen Capital Management (Raiffeisen KAG).

Trend towards higher sustainability in emerging markets

There is also a trend towards more sustainable, responsible business practices in emerging markets. Whether it's climate and environmental protection, better social standards, less corruption and more transparent corporate governance – a lot of progress has already been made in these areas, and much more could be achieved in the coming decades. Nevertheless, the topic of sustainability is still not widely associated with emerging markets. This is unjustified, as there are ‘double rewards’ to be reaped here:

• Firstly, more responsible business practices can unlock further earnings potential for many companies (such as fewer reputational risks, fewer accidents at work, fewer legal violations, happier, healthier and more productive employees, shareholder-friendly corporate policies, etc.).

• Secondly, investors can support and promote the trend towards greater sustainability with their own investments. In this context, the fund management's commitment to sustainability is an important factor for companies.

  The fund Raiffeisen Sustainable EmergingMarkets Equities offers both, combining the themes of sustainability and emerging markets.

However, genuinely sustainable investing requires specialised expertise, sound, proven analysis and selection processes, and a framework for interacting with companies. Raiffeisen Capital Management has meticulously developed this expertise and has repeatedly been recognised for its sustainability competence with awards and seals of approval from independent third parties.

Impact assessment

The Raiffeisen-Nachhaltigkeit-EmergingMarkets-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.