Q3 Emerging Markets (Unconstrained) Outlook

Asian technology equities and selected gold and Brazilian exposures should remain attractive, but rising global bond yields justify lower portfolio risk.

• The recent pullback in Asian technology was viewed as technical and positioning-driven rather than fundamental, while demand for datacentre components remained strong during the team's research trip to Korea and China.
• Bottlenecks in memory, substrates, power and advanced packaging continue to constrain the North Asian technology hardware ecosystem, and the portfolio remains invested in these areas.
• The major Korean memory producers could generate cash equivalent to 70-90% of their current market capitalisation over the next three years, with greater clarity on shareholder distributions potentially providing a Q4 catalyst.
• Gold remains a structural theme despite a short-term headwind from more hawkish rate expectations; the supporting factors are deteriorating developed-market fiscal positions, currency-debasement concerns and continued central-bank buying, particularly in emerging markets.
• Ahead of Brazil's 25 October presidential run-off, the team increased its overweight after Flavio Bolsonaro led Lula in the first round, adding to Financials and Utilities and initiating a car-rental position; gains for PL and other right- or centre-right parties were also seen as market-positive.

Takeaway: The team remains constructive on emerging-market equities and favours constrained technology supply chains, cash-generative gold miners and Brazilian assets with improving political risk, but higher nominal and real yields could raise the cost of capital and weigh on long-duration growth stocks.