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Asia and EM in 2026: accelerating momentum in credit and equities
Dhiraj Bajaj
CIO, Asia Fixed Income and Equities
Asia Fixed Income team
Asia Equities team
key takeaways.
Asian and emerging markets (EM) have entered a multi year phase of abundant liquidity, underpinned by US rate cuts, regional easing, capital reallocation, Chinese savings and resilient regional growth
Liquidity is compressing yields in Asian USD denominated credit, with solid corporate fundamentals and attractive spreads, while Asia increasingly acts as a net creditor to global EM; the Middle East and India stand out as key regional opportunities
Equities benefit from deep liquidity and powerful secular drivers including technology leadership, consumption and financial deepening across key sectors.
Asia’s macro environment: awash with liquidity
In 2026, Asian and emerging markets (EM) are in one of the most supportive liquidity backdrops seen in more than a decade. We believe the region is in the early stages of a multi year phase of abundant liquidity that first took shape in 2025 and is now becoming deeply embedded across funding markets, corporate balance sheets and investor positioning. For a region with already substantial domestic savings pools, this influx of capital is likely to remain a powerful tailwind across public and private assets in the years ahead.
The drivers of this liquidity cycle are broad based and mutually reinforcing. US Federal Reserve rate cuts have reduced the global cost of capital, while Asian central banks are now moving into more accommodative policy cycles for 2026 and 2027. Alongside this, regional capital is gradually reallocating away from US markets and back into Asian assets, reflecting relative valuations, a stronger macro growth profile and improving domestic market depth.
Asia and EM markets outlook: tapping into a multi-year bull market
Explore the full 2026 outlook for our views on USD credit and equities.
Another notable ingredient is the incremental unlocking of Chinese household savings, which have surged to a record USD 23 trillion1. Even a marginal release of these balances into consumption, deposits or investment channels has meaningful implications for regional liquidity conditions. Combined with record goods trade surpluses and solid domestic demand, the net effect has been a steady rise in the availability of regional capital and a sustained decline in its cost.
Positive drivers for Asia and EM credit
This environment continues to place downward pressure on yields for USD denominated debt across Asian issuers, spanning both investment grade (IG) and high yield (HY). Corporate fundamentals remain broadly robust, supported by healthy cash levels, disciplined capex and improved refinancing visibility. At the same time, Asian USD yields continue to trade above local currency equivalents, providing a compelling relative-value anchor for regional and global investors seeking carry in a lower rate environment.
We also expect surplus Asian liquidity to continue supporting higher quality segments of global EM corporate and sovereign USD markets.
A defining shift is underway: Asian institutions, asset managers and wealth investors are increasingly acting as net creditors to emerging market borrowers, supplying steady demand for hard currency assets. Over time, this dynamic may become a more structural feature of global EM fixed income, aligning Asia’s role as both a major source and a major destination for capital.
We explored the 2026 outlook for Asian credit and equities in our recent webinar.
watch the webinar replay
Regional opportunities in the Middle East and India
Within this broader EM landscape, we see particularly strong opportunity in the Middle East and India.
The Middle East has rapidly evolved into a key structural supplier of EM credit. Several forces are at play: rising fiscal financing needs, ambitious economic transformation agendas and sizeable refinancing pipelines have lifted issuance volumes significantly. Markets such as Saudi Arabia and the UAE now account for a meaningful share of EM hard currency supply, supported by improving liquidity, a more diverse issuer base and rising foreign investor participation. Proactive liability management, disciplined fiscal frameworks and continued capex programmes reinforce the region’s position as a stable and increasingly systemically important anchor within EM hard currency markets. We expect these trends to continue well into 2026.
Fig 1. Gross supply of EM corporate bonds by region (USD billions)2
India, meanwhile, enters 2026 in what we describe as a macroeconomic ‘sweet spot’. Domestic demand remains one of the strongest globally, underpinned by rising household consumption, supportive demographics and improving labour market dynamics. Corporate balance sheets are the healthiest they have been in more than a decade, enabling a revival in private sector capex. The monetary backdrop is also shifting: falling inflation and rising real rates have opened the door for the Reserve Bank of India to begin an easing cycle, creating a constructive setting for credit expansion.
Externally, India’s approach to calibrated currency depreciation is acting as an effective buffer against tariff-related pressures, helping preserve export competitiveness while keeping the current account deficit contained. Combined with the prospect of a sovereign credit upgrade and sustained index-related inflows, these factors present meaningful potential upside for Indian assets across fixed income and equities in 2026.
Asian equities have enjoyed a strong run, with the MSCI AC Asia ex-Japan Index rising more than 40% since January 2024. We believe this performance reflects not only abundant liquidity but also the region’s durable long term growth drivers – from rapid technological innovation to rising wealth and domestic consumption. These secular themes position Asia as one of the most structurally attractive equity markets globally through 2030 and beyond.
Our equity outlook focuses on five major areas where we see sustained compounding potential:
Korean and Taiwanese semiconductor and hardware leaders, which remain central to the global technology super cycle — from AI infrastructure to advanced manufacturing
Chinese internet and cloud platforms, which continue to expand internationally and, in our view, remain systematically undervalued relative to their growth potential
Asian manufacturing champions in robotics, electric vehicles (EVs) and batteries, benefiting from global demand for automation and the energy transition
Leading banks and fintech players, supported by rising loan growth, improving asset quality and multi year earnings compounding
Asia’s discretionary consumer sector, where companies across products and services are positioned to capture long term gains from the rise of the Asian middle class.
In our view, Asia’s liquidity cycle, strong macro resilience and powerful secular themes create one of the most attractive multi year opportunity sets globally. The region’s role as both a growth engine and a capital provider will continue to shape global markets through 2026 and beyond.
This document is a Corporate Communication for Professional Investors only and is not a marketing communication related to a fund, an investment product or investment services in your country. This document is not intended to provide investment, tax, accounting, professional or legal advice.
