By Vivek Dhawan, senior fund manager, emerging markets equity at Candriam
While China remains a key component of the emerging markets universe, its dominance has often meant that investors were, in practice, taking a very concentrated exposure. Looking beyond China opens a more diversified opportunity set and tends to allow investors to access a much broader set of growth opportunities that are sometimes overshadowed by China’s weight in traditional benchmarks.
Investors may benefit from exposure to demographic tailwinds from regions such as India and Indonesia, where demographics and rising consumption are powerful drivers, as well as to markets like Latin America, which benefit from reforms and commodity cycles.
At the same time, significant exposure to tech-heavy countries like Taiwan and South Korea provides access to globally competitive technology and innovation, which may help investors broaden their exposure to a wider range of return drivers across regions and sectors that tend to be underrepresented in traditional emerging markets allocations.
The impact on sector allocation of excluding China
The most visible shift is the reduction in consumer technology: a sector that increasingly faced headwinds from regulatory uncertainty, deflation and overcapacity in China, and hence carries far less weight in the ex-China universe. Consumer discretionary and, to some extent, financials also step back.
What comes forward instead are the two themes that are central to the ex-China growth story. First, the technology revolution: Taiwan and South Korea move to the heart of the portfolio, representing the semiconductor and hardware infrastructure on which global AI and digital transformation depend.
Second, the demographic dividend: India, Brazil and the Asean economies bring a completely different profile — young populations, rising consumption, financial systems still in early stages of development. Excluding China may allow these two structural growth stories to have the space they deserve.
Asia ex-China: targeted trends and selective exposure
We live in an interconnected world, and it would be naive to suggest that EM ex-China equities are somehow insulated from developments in China. As the world’s second largest economy — its gravitational pull is real.
But there is a difference between indirect exposure and direct risk, and that distinction matters. Direct risk comes from policy, regulation or domestic cycles; indirect exposure is more about trade and demand. Within Asia ex-China, one of the key shifts is supply chain diversification.
Companies are no longer comfortable with single-country dependence, and manufacturing is gradually spreading across India, Indonesia, Vietnam. It’s not just about low-cost production anymore — these economies are moving up the value chain, supported by infrastructure and policy.
AI remains an important area of focus, particularly at the infrastructure level. Not just semiconductors, but everything around it: energy, grids, data centres, the physical backbone needed to make AI work at scale. Taiwan and South Korea sit right at the centre of that ecosystem, and it is a global story more than a regional one.
On India, there are opportunities in manufacturing, infrastructure, financial inclusion, consumer upgrade, and healthcare among others. It is not just about Asia, markets such as Brazil and Mexico bring something different to the table — different cycles, different drivers, and in Mexico’s case, a clear link to nearshoring.
Other smaller but critical themes which are emerging include nuclear and waste management. Software, for now, remains on the sidelines until things become clearer.
Latin America and EMEA
Together, LatAm (Latin America) and EMEA (Europe, the Middle East, and Africa) represent healthy diversification, bringing an entirely different economic texture to a portfolio otherwise anchored in Asian technology.
Latin America is a mix of long-term structural stories and tactical opportunities that reward patient, selective investors. Brazil in particular has some genuinely interesting utility companies that tend to fly under the radar.
Financials are a key component, offering access to underpenetrated banking systems with strong profitability dynamics. And despite investor scepticism and the noise around political change, it is likely that the proximity to the US will continue to generate real spillover growth effects across Latin American economies — nearshoring is not a story that stops and starts with election cycles.
In EMEA, key themes include renewables and financial convergence in eastern European banking — both of which are still in early innings and carry meaningful upside as capital allocation in the region catches up with the opportunity.
What LatAm and EMEA ultimately bring is balance: more domestically driven growth, greater exposure to financials, infrastructure and telecoms, and less reliance on the global technology cycle. While these regions don’t replace Asia — they make a portfolio more diversified and resilient.
