Emerging Markets Outlook 2025: Ashmore Sees Significant Opportunities
Despite uncertainties surrounding U.S. trade policies, Ashmore Investment forecasts significant opportunities for emerging markets (EM) in 2025. The brokerage attributes this to economic reforms and geopolitical shifts, which have led to improving economic fundamentals and credit metrics in most countries.
Ashmore’s annual outlook highlights a robust recovery trajectory for EM economies, supported by consistent gross domestic product (GDP) growth surprises over recent years. The brokerage points to structural reforms and fiscal discipline as key drivers, although countries like Brazil and Mexico, which have deviated from fiscal discipline, face challenges.
Political developments in major EM nations are also expected to shape prospects. Ashmore notes that South Africa’s transition to a coalition government is expected to enhance economic stability, while India’s fragmented parliament offers potential for balanced policy-making. Conversely, Mexico’s Morena party supermajority has dampened investor sentiment.
The brokerage also examines the potential impacts of renewed U.S. trade tariffs under President Trump’s administration. While tariffs pose risks to major exporters like China, Vietnam, and Mexico, Ashmore suggests that these measures may ultimately benefit EMs, potentially creating investment opportunities.
In the equity market, EM stocks are viewed as undervalued relative to developed markets, offering compelling risk-reward dynamics. Ashmore identifies Brazil, Chile, and South Africa as particularly attractive, citing catalysts like improved fiscal accounts and favorable commodity prices.
The brokerage projects a base-case earnings growth of 13% by 2026 for EM equities. In a worst-case scenario, EM equities could see a 12% drop, while a best-case scenario suggests gains of 23%. However, Ashmore notes that favorable conditions, such as higher EPS and price-to-earnings ratios, could push returns as high as 40%.
Ashmore recommends a disciplined, active investment approach to navigate trade uncertainties and geopolitical risks. With careful allocation, the firm sees 2025 as a pivotal year for capitalizing on the growing resilience and potential of emerging markets.