Emerging market (EM) equities are attracting investor attention, with the latest Bank of America survey showing about 37% of fund managers overweight in the asset class — the highest reading since February 2023.

Nearly half (49%) of respondents consider EM stocks undervalued, while a record 91% view US equities as overpriced.

Andrew Oxlade, investment director at Fidelity International, shared that the MSCI Emerging Markets index has risen 11.1% year-to-date to 6 August, outperforming the S&P 500’s 1.7% gain. The US dollar, down almost 10% in 2025, has supported EM performance by lowering debt-servicing costs, attracting capital to non-dollar assets, and lifting commodity prices.

Survey participants said expect further declines in the greenback, which is currently the most underweight position in the poll.

Emerging markets trade on a price-to-earnings ratio of 17.4 versus 19.6 for global equities and 24.3 for US shares, as of 11 August. EM equities offer a dividend yield of 2.75%, compared with 1.6% for the US market. Oxlade pointed out that investors are buying into the long-term growth story of emerging markets at a discount.

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According to Fidelity’s study of 1,000 UK investors, 14% now see emerging markets as a buying opportunity over the next year.

Oxlade commented: “Investor sentiment is clearly pivoting. With US equity valuations high and the dollar weakening, we’re seeing emerging markets come back into focus – particularly for those seeking diversification, income, and long-term growth.

Our research and platform data show that investors are being selective. They’re leaning into income-generating strategies and quality-led approaches within EMs, using this moment to gain exposure to areas with attractive valuations and improving fundamentals.

Of course, emerging markets have had a mixed record over the past two decades – especially when compared to the US. But the backdrop today feels different. While concerns around US tariffs have held some investors back, we believe those fears may be overstated in some cases. For instance, companies in the MSCI China index generate just 3% of their revenues from the US, compared to 85% from domestic demand. That’s very different from Taiwan or Korea, where US exposure is far greater.”