From Doom in DMs to EM Boom

• Emerging markets are quietly outperforming. JPMorgan’s index of local currency EM bonds and MSCI’s EM equity gauge are both up roughly 10 percent this year, outpacing the MSCI World’s 4.8 percent and the FTSE World Government Bond index’s 6.6 percent. Despite trade tensions and geopolitical unrest, investors are shifting out of dollar assets, drawn by higher real yields, low valuations, and fresh macro flexibility across EMs.

• The key drivers? A softer dollar, inflation-adjusted yields at 20-year highs, and growing investor fatigue with erratic US policymaking. Even as geopolitical tensions simmer, EMs have held firm, a sign that capital is starting to rethink where it feels safe.

Why Now, After So Long Out of Favour?

• Investors are returning to names they had written off. Valuations are low, inflation-adjusted yields are high, and many local currencies are strengthening, giving EM central banks breathing room to cut rates.

• Even with $22bn in net outflows YTD, flows turned positive in May and June. As one Goldman analyst put it: small inflows, big impact, thanks to how under-owned EMs had become.

It’s Not Just Rates, Tech’s Driving Too

• China’s edge in semis and AI is drawing attention. Global allocators are warming to the idea that not all innovation needs to come from the US megacaps.

• Some are even rethinking old assumptions. Fidelity now holds Brazilian bonds and sees Korean equities as “too cheap to ignore” after policy stabilisation. Risk premia are shifting, but not where you’d expect.

How We’re Positioning at Cordoba

• This rally has legs, and we’re not fading it. At Cordoba, we’ve been steadily increasing EM exposure, particularly in countries with fiscal headroom, monetary flexibility, and real innovation pipelines. Malaysia remains a standout in our allocation. As we have outlined in previous notes, the combination of onshore demand, pension fund buying, and a credible fiscal anchor gives Malaysia’s local bond market a strong base, especially as disinflation takes hold and Bank Negara leans dovish.

• We’re also doubling down on Vietnam, where structural reforms and FDI resilience continue to anchor equity markets. Despite uncertainty around global trade and tariffs, Vietnam’s domestic demand, manufacturing capacity, and long-term digitalisation push remain intact. We’re holding equity exposure across industrials and consumer plays, recognising that market volatility may be a feature, not a bug, of an otherwise durable uptrend.

• We’re selectively adding local-currency bond exposure in places like Brazil and Indonesia, while also rotating into equity stories with real catalysts: Korean tech, Indian infra, and China’s AI-adjacent suppliers. But the key is to stay nimble. This isn’t about blindly chasing the rally, it’s about recognising that the macro tables are turning, and being early, not late, to that shift.